U.S. Forest Projects Generate Questionable Carbon Credits

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States and counties across the U.S. are looking at public forests for carbon credits hoping to generate millions of dollars.

The State of Michigan and five counties in Wisconsin set the precedence.

Michigan had inked agreements with Blue Source, LLC, a carbon development firm. This partnership aims to produce carbon credits starting later this year or in 2023.

The agreement also creates projects covering about 800,000 acres of forest. This is 3x bigger than the current public forestland producing carbon credits in the U.S.

The State of Michigan expects to generate 10 million credits with the projects over the next decade. This amount corresponds to the emissions of over 2 million cars or a big coal power plant in a year.

US Forests Enrolling Dubious Carbon Credits

The promise of credit generation of those carbon projects is huge. But reviews and interviews by the Bloomberg Green team revealed that the case seems to be not likely.

Overseers of the U.S. forests involved in the projects don’t expect changes in how they’re managing the public land. Rather, the promised payments would be capitalizing on the same forest practices.

Responses from interviewed state and county officials share the same message. That’s the carbon projects won’t impact their forest management practices and harvest.

As per Jeremy Koslowski, forest administrator for Rusk County,

“We’ve already done the legwork to get where we need to be.”

Also, another state official, Scott Whitcomb, said that the carbon project is consistent with their timber harvest strategies. He noted,

“We’re not expecting to see a change or difference in management from the working forest model we have now.”

Officials’ statements bring light to the “additionality” that these carbon credits will generate.

Meanwhile, the market for carbon credits had reached past $1 billion for the first time. But the questionable U.S. forest carbon offsets have cast doubt on the market’s future.

Analysts suggest that the carbon market can surge as high as $100 billion or more. But it may crash if there are no big improvements made in ensuring the quality of carbon credits.

Some specific cases raise key questions about the quality of carbon credits generated by U.S. forests.

The case of Michigan’s Pigeon River County state forest

Michigan’s Pigeon River County project covering 105,000 acres claims about 1 million carbon credits over the next decade. The basis of this credit generation is on expectations that harvests will increase.

The project claims that timber harvest will triple in the following decade (from 20,000 to 55,000 cords) a year.

But that will only be the case if the state has plans to triple its harvests. Officials said there weren’t any such plans.

Yet, Blue Source countered that the carbon projects they signed with the State of Michigan meet the highest quality standards. The carbon project development firm will earn about 10% – 33% of the project’s proceeds.

The firm said that their US forest carbon projects heed the rules set up by the American Carbon Registry. It’s one of the carbon registries that make protocols for carbon projects.

Meanwhile, DTE Energy, a Detroit-based energy company, agreed to buy $10 million worth of credits from the project.

The firm plans to sell carbon credits from this U.S. forest project to its climate-conscious customers who want to pay extra to cut emissions. DTE seeks to add about $48 to $192 per year to their rate for those wanting to offset their natural gas consumption.

As per the American Carbon Registry’s point of view, the executive director said that,

“…Harvest plans frequently change and the carbon project now provides legal certainty, which was absent before, that the project area will increase its carbon stocks over time…”

Michigan is also working with Blue Source to develop a second carbon project on another 125,000 acres of public forest. Other states seem to follow suit.

The case of Wisconsin counties

Blue Source is also partnering with the State of Wisconsin. The state counties own some 2.4 million acres of forests, which is over 40% of all county-owned forests in the U.S.

Five counties in Wisconsin have signed carbon project contracts with Blue Source. The firm said that these projects will create a lot of carbon credits.

Both parties to the agreement believe the projects will help preserve trees. There’ll be highly motivated to cut fewer trees to gain more carbon credits.

But same with the case of Michigan, forest administrators in five counties said those projects won’t affect their harvests. They’re also not anticipating any changes to their timber management.

Other officials in Wisconsin say the carbon payments will help lock in their current practices for decades to come.

And if carbon prices will rise high enough to rival timber values, it can encourage them to harvest less.

Blue Source and other carbon development firms are pitching officials who think they can get over $30 million out of carbon projects.

Still, the calculation of carbon credits that those US public forest projects will generate seems questionable.

As one county official said,

“It’s a little silly to pay us to do something that was already going to happen, which could allow someone to pollute somewhere else.”

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A Guide on Carbon Credit Accounting and Net Zero Reporting

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Why do companies have to consider carbon credit accounting along with their climate goals?

This question has been bouncing around the Western corporate world for several years. But its urgency began to kick in when the Securities and Exchange Commission released its initial GHG emissions disclosure rule.

The proposed regulation requires public firms, particularly the big ones, to report emissions. This includes Scopes 1 and 2 as well as Scope 3 emissions if found material.

And a big change the rule will cause is how companies will account for emissions transactions in their financial reports.

This guide will help address this concern. It will help you know how to weigh the effects of top net-zero initiatives on financial reporting.

It will also provide guidance on how carbon credit or allowance items will be accounted for with some illustrative examples.

Carbon Credit Accounting and Achieving Net-Zero

Investors, consumers, and regulators worldwide are making emissions reporting imperative for businesses.

Hence, the concept of net-zero emerged. It’s a point of balance wherein emissions produced are offset by the amount of emissions reduced and removed from the air.

A simple yet profound quote “reduce what you can, offset what you can’t” has never been vital to hit net zero. Yet, turning a company’s net-zero goal into reality is not that easy.

There’s no single approach that works for any business, big or small, to account for its climate goals. Be it a net-zero, carbon-neutral, or carbon-negative target.

The most effective strategy toward net-zero is a combination of various actions. These include:

emissions reduction across the value chain (Scopes 1, 2, and 3 emissions)
removal of unavoidable emissions (with corresponding carbon removal credits)
offsetting emissions via carbon credit investments in green / carbon / sustainable projects

Take note that a carbon credit is a tradable permit given to an entity that represents the amount of CO2 it’s allowed to emit.

So, accounting for each carbon credit that a company has is important in its journey to net zero.

Despite the confusion surrounding the three actions above, corporate net-zero pledges are ramping up. Many Fortune 500 companies have pledged to reduce their Scope 1 or direct emissions.

Firms that haven’t considered cutting their indirect emissions (Scopes 2 and 3) may be in a disadvantaged position. Their partners may look for others with clear CO2 reduction targets, for instance.

Or worse, they could be placing themselves at reputational risk or lower market value. In this sense, knowing how to create and execute a net-zero plan is crucial to do away with the risks involved.

And a sure-fire way to that is understanding the common net-zero initiatives and how they affect financial accounting.

Common Net Zero Initiatives and Their Impact on Financial Reporting

Developing a good approach to getting net-zero needs consideration of various means.

For instance, a company has to recognize what current technology is out there or what’s underway. It also has to know what others in the firm’s ecosystem are doing that may cause Scope 3 emissions.

Most important is that the costs of each selected strategy have been accounted for.

The major accounting guideline for some net-zero initiatives in the US is the GAAP. And the GAAP mostly reflects the key international accounting principles of the IASB. It’s the International Accounting Standards Board.

So, a company may use the IASB accounting guidelines which most firms do. Or it may be necessary for a firm to make its own accounting policies based on certain transactions.

Here are the three common net-zero strategies businesses are using today and their impact on financial reporting.

Technology and its impact on financial statements:

Technological solutions are a major path taken by many companies toward net-zero. They invest in capital projects that improve efficiencies of operations while reducing emissions.

Most common examples are electrification and making buildings or infrastructures greener (green certifications).

Others are focusing on research and development (R&D) to improve technology to both reduce and remove carbon. Examples include direct air capture (DAC), mineralization of captured CO2, and growing algae in deserts.

Here are major accounting considerations to make when exploring this carbon reduction initiative.

Renewable energy and its impact on financial statements:

A lot of companies and countries are investing in renewable sources (wind, solar, hydro). This net-zero strategy generates the REC or renewable energy credit. Each megawatt-hour of electricity produced from a renewable resource creates one REC.

A state or jurisdiction or an agency certifies REC. It’s also tradable same with carbon credits. A company may invest directly in renewable projects to earn RECs. It can also buy it from power generators or move to a greener facility to claim RECs.

REC holders can use the credits to offset power used from other sources and account for the reduced emissions into net-zero goals. Accounting for these carbon credit alternatives is a bit more complex.

Carbon offset program and its impact on financial statements:

Many emitters are using this net-zero initiative to offset emissions they can’t reduce. In fact, the projected growth in demand for carbon offsets in this decade looks very promising as shown in the chart below.

There are plenty of programs that generate carbon offsets. Common ones include reforestation, farming or agriculture management, and carbon capture.

Each project produces a certain amount of carbon offsets, depending on its nature and capacity to reduce or remove CO2 from the air.

Companies have to be diligent in picking the projects to source their carbon offsets. They need to consider some critical factors to ensure the quality of offsets they buy.

There must also be a credible body that verifies the program and the calculations of emissions reductions are accurate. Here’s our complete guide on how offsets are created, purchased, and used.

How is Accounting Done for Carbon Credit?

High CO2 emitting sectors (e.g. energy, aviation, and automobile) are under regulatory or compliance credit schemes. It means they have to meet a certain limit on emissions set by a government regulatory framework.
 
This is also called the cap-and-trade scheme or emissions trading system (ETS). Currently, there are three major ETS existing worldwide. These are the European Union ETS, California ETS (US), and Chinese National ETS (China).
 
These systems create the certified emissions reduction (CER) credits.
 
Any excess in CER credits (reductions are less than the limit or cap) are tradable. But a negative CER credit (emissions exceed the set limit) results in fines or in buying offsets.
 
Companies can trade credits from other companies, through a broker, or on an exchange. To know how this compliance carbon market works, read this full guide.
 
Globally, ETS systems are the most prevalent market mechanism for carbon credits. It reached ~$850 billion in 2021, a 164% increase from 2020.

Unfortunately, there’s a variety of carbon credit accounting issues due to the lack of mandatory rules until now. So, this section provides some insights on how to tackle this matter.

Key International Accounting Bodies for Carbon Credits

After the Kyoto Protocol ratification, some initiatives in accounting for credits are from:
Emerging Issues Task Force (EITF) in 2003
International Financial Reporting Interpretations Committee (IFRIC) in 2004
International Accounting Standards Board (IASB) with Financial Accounting Standards Board (FASB) in 2007
Both accounting agendas by the EITF and IFRIC were not pursued due to controversies.

The IASB Accounting Principles

Since there’s no regulatory guidance yet, some firms made their own emissions accounting policies. But most companies are accounting for their carbon credit transactions using the IASB’s IFRS.
 
This accounting standard specified that:
emission allowances (CER) are intangible assets and measured following IAS 38 Intangible Assets
if the CER is from a government, an entity can treat the credits as government grants on initial recognition (IAS 20)
as an entity produces emissions, a provision for its obligation is recognized to deliver allowances as per IAS 37
CER is a non-monetary asset that has no physical substance. So, it’s treatable as an intangible asset. But it’s an asset that’s often not held for use in the production of goods or services.
 
Rather, it’s held for sale and self-generated by the entity in the ordinary course of business. In this case, these allowances should be accounted for as the valuation of inventories as per IAS 2.
 
CER as Inventory Item (IAS 2)
IAS 2: an entity must account for inventories at a lower cost and net realizable value
Net realizable value: estimated selling price less estimated costs of completion and other costs to make the sale.
The cost of inventories consists of all costs of:
purchase, conversion, and other costs incurred in bringing the inventory to its present condition.
 
When accounting for carbon credit allowances (CER), major inventory costs may include:
research costs from exploring measures to reduce emissions
costs incurred in developing the selected alternative measures
cost of preparing the Project Design Documents
registration fees with the United Nations Framework Convention on Climate Change (UNFCCC)
Here’s what accounting for the costs of CER looks like when making a financial report:
 
Source: Gokten, S., Accounting and Corporate Reporting, 2017

Accounting for Carbon Credit under Voluntary Market

A company can also get carbon credits through a voluntary carbon project. The steps involved are identical only without the national or regulatory approving bodies.
 
But a third-party entity must verify the carbon credits created by the emissions reduction of the project.
 
Here’s how the accounting goes like for carbon credits under the voluntary market:
 
Source: Gokten, S., Accounting and Corporate Reporting, 2017
When it comes to accounting for the income from selling carbon credits, it may follow the IAS 9. It’s the accounting principle for revenue recognition.
 
In the U.S., reporting of regulatory credit sales falls under a non-GAAP treatment. 
 
So far, Tesla is the biggest seller of carbon credits within the regulatory market. It earned billions of dollars in selling abundant excess of its CER. It reported $679 million carbon credit sales in its Q1 2022 financial report.

Obviously, trading carbon credits proves to be so lucrative.

But more importantly, these credits created a dominant market mechanism that helps cut emissions. They give companies and countries viable options to reverse climate change effects.

Now it’s time for companies to beat the challenge of accounting for their carbon credit allowances or purchases. It’s another key to unlocking the potential of various net-zero initiatives.

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KraneShares Debuts US-Listed Global Carbon Offset ETF “KSET”

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KraneShares announced the launch of its Global Carbon Offset Strategy ETF (Ticker: KSET) on the New York Stock Exchange.

Krane Funds Advisors, LLC (” KraneShares”) is an asset management firm known for its global exchange-traded funds (ETFs).

In 2020, they launched the KRBN Global Carbon ETF (KRBN) which gives investors exposure to the EU ETS carbon credits, California’s CCA carbon credits, and the RGGI of the northeastern United States.

In Oct 2021, they also launched the KEUA (European Carbon Allowance ETF) & KCCA (California Carbon Allowance ETF).

KraneShares also provides differentiated and innovative investment strategies to global investors. And KSET is one of them and its most recent ETF strategy.

KraneShares Global Carbon Offset ETF KSET

KSET, KraneShares’ latest addition to its suite of carbon market ETFs, is the first in the U.S. to offer exposure to carbon offset futures. This marks a departure from the existing carbon credit funds. It debuted on the NYSE with an expense ratio of 0.79%.

KraneShares Global Carbon Offset KSET will track carbon offset futures contracts. It also gives investors access to futures contracts that are not available through an ETF before.

And so, it offers broader coverage of the voluntary carbon market (VCM).

In particular, KSET will include the nature-based global emission offsets (N-GEOs) and also the global emission offsets (GEO).

These futures contracts trade via the CME Group, the largest financial derivatives exchange. The Group sells those offsets to entities that volunteer to cut their emissions.

KSET will add new offset markets as they reach scale.

What are Carbon Offset Futures?​

The VCM has to scale by about 15x its present size to help reach global emissions goals as per CME Group analysis. And they believe that having a physically delivered futures market is one way to scale up the VCM.

N-GEO futures follow the Verified Carbon Standard (VCS) requirements for AFOLU (Agriculture, Forestry, and Other Land Use) projects.

Also, these futures get certified by the Verra Registry’s Standard. It’s the go-to standard that identifies projects that particularly address climate change. It also verifies projects that conserve biodiversity and support local communities and smallholders.

Meanwhile, GEO contracts are CORSIA-compliant offsets. They aim to zero out the airlines’ carbon footprint.

GEO offset criteria are from the International Civil Aviation Organization (ICAO). They are also from the VCS, Climate Action Reserve, or American Carbon Registry.

These offsets differ from credits tracked in the KraneShares Global Carbon ETF KRBN. The latter allows entities to make emissions under compliance markets.

The Timely Debut of KraneShares KSET

Buyers of carbon offsets should reduce their Scope 1, 2, and 3 emissions first. They can then buy carbon credits to offset their unavoidable emissions.

Firms use carbon offsets as a short-term solution while working on long-term emission reduction efforts. This is where KSET’s launch is a timely market expansion.

KSET includes the $1.4bn KraneShares Global Carbon Offset ETF. It now covers both the compliance market and the VCMs.

As per Jonathan Krane, the company’s CEO,

“KSET is the first US-listed ETF to combine the leading carbon offset futures markets into a single investable fund… It gives investors holistic access to global decarbonization efforts.”

VCMs are a vital mechanism that boosts global efforts to achieve net-zero targets. Though they’re voluntary, pressure from stakeholders will make VCM’s reductions a must.

Luke Oliver, KraneShare’s head of climate investing, said that carbon offsets will drive demand and returns on tow for the contracts.

Investors can be confident that credits behind KraneShares global carbon offset KSET are reliable. They’re from emission reduction activities verified by renowned carbon offset registries.

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A Total of 1.2 Billion Carbon Credits Surplus May Swamp The Market

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Analysts said that a total of 1.2 billion metric tons of carbon credits surplus could swarm the market at short notice.

A Trove Research consultant indicated that there’s a market surplus of 600 million MT of carbon credits. These credits have been issued but not retired and enough to meet market demand for about 3.5 years.

There are also another 600 million MT credits that sit in project developers’ accounts. They’re created but lack verification yet from accrediting bodies. And so, these credits are “ghosts” – they’re not in emissions registries but could flood the voluntary market if prices rise.

Guy Turner, Trove Research CEO and founder, said that

“There is 1.2 billion Mt of credits that can be issued today and be provided by existing projects…That can weigh on the market at certain points in time… this could lead to volatility.”

Why Is There A Carbon Credits Surplus?

The excess credit supplies are likely old and may lead to price discounts in voluntary markets. Why is there a surplus?

Trading carbon credits started way back after the ratification of the UN Kyoto Protocol. It’s the first international pact to cut down emissions.

While the trading volume via the regulated market is huge, sizable trading is also happening in the voluntary carbon market (VCM). The momentum behind the VCMs has been strong and trading volume jumped high last year.

In fact, it’s expected to grow from $0.4 billion a year in 2020 to up to $25 billion in 2030 and as much as $480 billion in 2050. The world targets to reach net-zero emissions by 2050.

In 2021, carbon credits for almost one billion tons of CO2 were for sale to would-be carbon offsetters on the VCM. But there have been more sellers than buyers.

Hence, there’s a surplus from old carbon credits. This excess in supply is equal to about 7 to 8 times the present annual demand.

Plus, there are also credits not verified by certifying bodies. They emerge when some project developers didn’t pay their verification fees before issuing the credits. It happens when carbon credit prices are too low.

Turner from Trove Research predicts that spending on carbon credits will jump 20-fold in the next decade.

But there’s a fear that the surplus stocks of ghost carbon credits will meet much of that credit demand.

So What Should Happen?

Some governments review their current carbon credit schemes to weed out the junk. While new rules are being written to ensure the quality and reliability of the credits.

Better yet, investors have to assess first the credits they’re going to buy using a set of criteria. This is important to prevent double-counting for the same credits or buying credits that can’t provide real offsets.

Despite some doubts about the role of carbon credits in offsetting footprint, there are many projects that need them to take off and cut emissions.

The big trend right now is putting huge credits in projects that deliver carbon removal. Tech giants have been pooling money in portfolios that fund carbon capture and store it for good.

The recent XPRIZE carbon removal winners are a list of innovators in this space.

Best of all, a lot of companies are committing to report their GHG emissions based on the Science Based Targets initiative’s (SBTi) approach. It’s the go-to standard for corporate emissions reporting.

In the last quarter, over 400 businesses signed up with SBTi. This corresponds to around 370 million metric tons of GHG emissions.

Thus, we can still expect that the reported carbon credits surplus will be actual reductions if more firms and individuals seek to offset their footprint.

Original source: Quantum, Trove Intelligence,|Yale School of the Environment

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Musk-Funded XPRIZE Carbon Removal Reveals 15 Milestone Winners

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Elon Musk-funded $100 million XPRIZE Carbon Removal competition revealed its 15 milestone round winners.
 
The XPRIZE competition aims to encourage the development of innovative CO2 removal solutions to cut emissions.
 
XPRIZE aims to tackle the world’s biggest challenges in exploration, environment, and human equity. It does so by crowdsourcing solutions through large-scale competitions like the Musk Foundation’s’ $100M prize.
 
The 15 winning teams will be receiving $1 million each to help advance their projects. The XPRIZE carbon removal competition started last year and will continue until 2025.

The XPRIZE Carbon Removal Competition Mechanics

This XPRIZE carbon removal competition has the biggest collection of carbon removal innovators. The milestone winners are from nine different countries. These are the U.S., the U.K., Canada, Australia, France, Iceland, Kenya, the Netherlands, and the Philippines.
 
It’s important to emphasize that these winners are not privileged to win the grand prize. Other groups are still eligible to join until December 2023 and compete for the final prize.
 
Essentially, the XPRIZE is not an ideas competition. Rather, it’s an execution and demonstration carbon removal competition. The entire submission and selection process was demanding.
 
There were 287 teams out of 1,133 teams that joined the competition that met the eligibility criteria for the Milestone Awards. Then a 70-expert panel screened and judged the proposals for scientific validity.
 
Finally, based on a set of criteria, the top 15 teams took home $1M each. The criteria include operations plans, performance data, life cycle analysis, and cost estimates. They also accomplished three major winning points.

They showed that their technologies are capable of removing 1,000 metric tons of CO2 from the air each year.
Demonstrated how much it costs to remove up to 1M metric tons of CO2 a year.
Show that they have a sustainable path to remove carbon at the gigaton scale.

The XPRIZE Carbon Removal Milestone Round Winners

Here’s a quick overview of each of the 15 XPRIZE carbon removal winners:

Calcite from 8 Rivers Capital – USA

8 Rivers Capital created calcite in collaboration with scientific institutes. Calcite uses the natural carbon absorbing abilities of Calcium Hydroxide. Calcite’s process captures CO2 fast at low cost (less than $100 per ton). Calcium hydroxide absorbs CO2 into calcium carbonate crystals same with how concrete dry and absorb CO2 in the process.

Carbyon – Netherlands

Carbyon develops a direct air capture (DAC) technology. It also uses a CO2 adsorbing substance with modified fiber membrane that has a huge internal surface and works at very low pressure drops. But its fast swing process allows for a very compact and reproducible machine design. As such, it results in a high CO2 capturing capacity and low manufacturing costs.

Heirloom – USA

Heirloom also offers DAC solution using natural processes and minerals in capturing CO2. Same with some XPRIZE carbon removal winners, its technology enhances the natural process of carbon mineralization. It helps minerals absorb CO2 from the air in days, rather than years.

CarbFix – Iceland

Carbfix speeds up natural processes wherein CO2 dissolves in water and interacts with reactive rock formations to form basalts. These are stable carbonate minerals that provide carbon sink for thousands of years. In this project, 95% of the injected CO2 mineralizes within 2 years, much faster than expected.

Bioeconomy Institute Carbon Removal Team from Iowa State – USA

Bioeconomy Institute takes a systems-wide approach to find environmentally and economically sustainable solutions. In particular, the XPRIZE carbon removal winner will use its prize to advance its use of pyrolysis. The process turns biomass from crop residues into a soil amendment and other goods.

Project Hangar – UK

Project Hajar is a joint project between Mission Zero Technologies and 44.01 that combines DAC with mineralization in geological formations. CO2 is captured from the air and transferred to peridotite underground using renewables. The natural process is then enhanced with the fastest mineral carbonation rates ever known.

Sustaera – USA

Sustaera’s solution is engineered to harness renewable electricity that minimizes new emissions. Its modular DAC system works around the clock in various locations (deserts, savannas, and grasslands). And its carbon-negative technology can capture, sequester, and utilize carbon.

Verdox – USA

Verdox designed an electric system that makes it easier to both soak up the CO2 and squeeze it back out. This DAC design allows for gases to flow through with less resistance, making the process more efficient. This different approach results in more efficient CO2 capture and release using only electricity, less the heat or water.

Global Algae Innovations – USA

Global Algae developed dozens of new technologies that made algae production commercial for food, fuel, and feed. Its patent pending Zobi Harvester technology, for instance, uses advanced membranes and very low energy. It achieves 100% algae harvest efficiency and rid the need for secondary dewatering.

NetZero – France

NetZero turns agricultural residues into biochar, a very stable form of carbon. Through pyrolysis process, biochar gets buried in the soil for good. Biochar is one of only a few long-term sequestration technologies, with high technology readiness level. It also increases crop yields and renewable electricity production from pyrolysis.

PlantVillage from Penn State – USA

PlantVillage created a triple A model – Algorithmic Agricultural Advice – to increase farmer’s yield and profits. The algorithm comes from integration of AI (Nuru), satellite, and unique field force. After inputting farming details, the algorithms then send out advices to farmers via phones, TV, and social networks.

Takachar & Safi Organics – Kenya

Takachar’s technology transforms massive amounts of waste biomass into marketable goods. Its equipment uses a novel concept called oxygen-lean torrefaction. It converts biomass into fuel, fertilizer, and other specialty chemicals. Takachar’s system is thus profitable by reducing the logistics cost of hauling biomass.

Captura – USA

Captura is a team of scientists, engineers, professors, oceanographers and business leaders. They’re developing cost competitive CO2 capture technology that extracts CO2 from oceanwater. It will then contribute gigaton scale of CO2 reductions. 

Marine Permaculture SeaForestation from the Climate Foundation – USA, the Philippines & Australia

Climate Foundation’s marine permaculture systems consist of floating platforms that use wave energy. The platforms will be placed at a depth of 25 meters, making them safe for navigation and deal with bad weather. Also, they’ll help restore nutrient upwelling to pre-global warming levels by promoting kelp forest.

Planetary Technologies – Canada

Planetary introduces the first Accelerated Carbon Transition (ACT) Platform, addressing many climate issues. In particular, it will remove CO2 and store it for good and convert mine tailings into safe, pure, alkalinity. It will also generate green hydrogen and battery metals that replace fossil fuels.

Carbin Minerals from the University of British Columbia, Vancouver – Canada

This XPRIZE winner optimizes carbon removal in mine tailings via carbon mineralization. The team developed proprietary technologies that speed up CO2 mineralization in ultramafic rocks. It also has the potential for gigaton-scale capture and permanent storage of CO2.

Obviously, the pace and depth of carbon removal initiatives have never been greater. But, the world still needs more and deeper emissions cuts through similar CO2 removal solutions.

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EKI Energy to Create 1 Billion Carbon Credits by 2027 & Net-Zero 2030

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EKI Energy Services announced its target to mobilize 1 billion carbon credits by 2027, along with its commitment to be net-zero by 2030.

EKI Energy or EnKing International is an Indian-based carbon credits developer and supplier. It delivers a wide range of services, particularly in the areas of climate change, carbon credits, and sustainability.

EKI help businesses and organizations to achieve their climate ambitions. It does so by offering carbon offsetting, carbon footprinting, and carbon-neutrality.

The developer also provides help with renewable energy and carbon offset standards.

The company also provides counseling on implementing nature-based solutions and generating nature-based credits.

It has traded more than 100 million offsets to date.

EKI is India’s largest Carbon Asset Management company that handled more than 100 ETS and over 200 voluntary projects.

EKI Energy’s Investment Focus on Carbon Credits

The firm’s target to produce 1 billion carbon credits by 2027 has a big role to meet the world’s need of 58 billion credits a year.

EKI has been identifying projects within and outside Indian territory that cut emissions. The major carbon credit projects it has been supporting include the use of renewables (e.g. solar, wind, and hydro). It also supported plenty of energy efficiency projects.

But with the new pledge of generating around $1 billion carbon credits, it’s largely focused on carbon reduction measures. In particular, the company aims to do backward integration of its carbon credit projects.

It plans to invest in low-cost environmental and community-based energy efficiency projects. Examples are biogas, tree plantation, and its own manufactured Improved CookStoves (ICS).

EKI said that their ICS will allow households to switch to an efficient cooking solution. Each cookstove is about 30% more efficient than traditional mud/stone fire cookstoves.

And so, it leads to a 45%-55% reduction in the use of firewood as fuel. Each of the ICS helps prevent as much as 4,000 kg of CO2 emissions a year.

The company aims to distribute 1.5 million cookstoves in the following year, some are for exports.

Meanwhile, the firm also plans to invest in safe water technology and green hydrogen projects to generate credits.

Below is the EKI’s project portfolio. All these projects are in line with the goals of Kyoto Protocol, Paris Agreement and the UN SDGs.

EKI Energy Investor Report

As per the firm’s CEO,

“Our renewed commitments will enable us to take greater charge of steering the planet to net-zero by becoming a service provider who leads by example to inspire million others in this quest…”

EKI’s “Steering the Planet to Net-Zero”

As the company’s gearing up for COP27 which is about six months from now, it unveils its new brand identity. It’s called “Steering the Planet to Net-Zero”, speeding up its climate action to full blown.

With this new brand positioning with a new logo, EKI declared its pledge to become net-zero by 2030. This climate commitment will help India fast track its stride toward net-zero by 2070.

A key component of the firm’s net-zero goals is speed-up its community-based projects.

In fact, the company had signed an agreement with Singapore-led Vitol Asia for distribution of its cookstoves. This project will generate over 11 million carbon offsets.

Moreover, EKI incorporated its associated company – GHG Reduction Technologies Private Ltd. earlier this year. This new entity has one sole task. That’s to fortify EKI Energy’s backward integration of carbon credit supply with its green initiatives.

According to the firm, community upliftment is its core focus area. But it also focuses on providing nature-based solutions (NBS) for companies to help them reduce/offset their emissions.

For instance, it partnered with Shell Overseas and form a joint venture that boost NBS in India. It’s a $1.6 billion investment from JV over a 5-year period to develop 155 million carbon credits.

Finally, EKI announced a renewed structure in line with its net-zero commitment. This includes the establishment of four key business units:

Carbon Credit Portfolio Management,
Environmental Commodity Supply,
Carbon Project investments, and
Net Zero Services & ESG

Other net-zero initiatives by EKI Energy include:

Transitioning to renewables by using solar panels on its corporate office
Introducing its “Green Initiative” policy across business division to reduce paper waste
Introducing Cloud-based applications for reduced data/storage emissions

On top of all these, the firm will focus on its new brand-building initiatives. That includes creating awareness about carbon credits.

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Shopify’s Commitment to Scale Up Carbon Removal Reaches $32M

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Shopify’s commitment to support carbon removal companies has now reached $32 million.

Shopify added nine new companies to its Sustainability Fund. This latest purchases strengthens the company’s position as the biggest carbon removal credits purchaser.

Each of the firms that Shopify had purchased from is working towards a common goal. That’s creating solutions that can make a significant contribution in reversing climate change impact.

Shopify’s new partners are from various industries. These include the following from each respective segment:

Direct Air Capture: Noya and Sustaera
Forest: DroneSeed
Mineralization: Carbin Minerals
Product: CarbonBuilt
Soil: Loam
Storage: 44.01
Transportation: Twelve and Remora

They’re now joining 13 other companies that Shopify’s Sustainability Fund has been supporting.

Shopify’s Carbon Removal and Reduction Portfolios

The firm’s Sustainability Fund is split into two key portfolios. These are the Frontier Portfolio and Evergreen Portfolio.

The Frontier Portfolio supports firms that remove carbon from the air and store it for the long term. Shopify is one of the large companies that’s part of the almost $1 billion Frontier fund. It has the same goal of speeding up carbon removal technologies.

While the Evergreen Portfolio funds temporary solutions like nature-based approaches and renewable power.

Here’s the breakdown of Shopify’s Sustainability Fund per carbon removal or reduction category:

Shopify had shown demand for carbon removal where there’s none before within 3 years after the creation of the Fund. More buyers are now entering the market.

Also, carbon removal companies have been scaling their development through Shopify’s funding support. In fact, they are growing their carbon removal capacity by up to 80x and increasing customers by 40x more.

Shopify’s approach on carbon removal purchases through its Sustainability Fund seems to work. It’s doubling down both current carbon reductions and permanent carbon removal initiatives.

But the company acknowledges that it can’t scale up its efforts alone. And so, its recent support of nine new companies is critical to its mission to ramp up carbon removal.

Shopify’s New Carbon Removal Partners

Here’s a sneak peek of each of the climate, tech-driven carbon removal enterprises that Shopify supports.

New partners under Frontier Portfolio:

44.01 (2,882 tons). Injects CO2 into peridotite rock where it mineralizes and stores there for good. Shopify covers the mineralization costs.

Carbin Minerals (200 tons). Optimizes carbon removal in mine tailings for net-negative emissions and metals vital for clean energy. Shopify’s funding supports expensive early testing.

CarbonBuilt (5,200 tons). Creates technology for low-cost, low-carbon concrete products like blocks. Shopify’s multi-year purchase gives a guaranteed revenue stream for concrete producers.

Noya (1,445 tons). Captures CO2 from air moved by existing cooling towers. Shopify’s funding helps Noya to scale up its technology and get more buy-in from others.

Sustaera (5,000 tons). Will create modular direct air capture tech that uses natural materials to suck in CO2. Shopify supports to hasten carbon removal technology deployment.

New partners under Evergreen Portfolio:

DroneSeed (50,000 tons). Reforests 300 acres of land ruined by wildfires in Oregon using drones. Shopify purchased DroneSeed’s biggest Climate Action Reserve-certified carbon offsets.

Loam (7,901 tons). Develops a microbial seed coating that increases carbon in soils for big CO2 removal. Shopify’s purchases help scale up technology and boost trust in soil carbon credits.

Remora (23,166 tons). Captures CO2 from semi-truck tailpipes as they drive and store it for long term. Shopify’s fund helps speed up tech adoption to decarbonize land shipping.

Twelve ($2.5M of E-Jet). Transforms captured CO2 to make E-Jet that uses fuel with an 80%+ lower carbon than fossil fuel jet. Shopify helps E-Jet adoption by commercial airlines and freight carriers.

Shopify chose these carbon removal companies using a set of criteria. These include technology and process, plans to scale, and purchases’ impact.

The company’s purchases will help those startups to speed up adoption of their technological solutions.

Stacy Kauk, Shopify Head of Sustainability, said that purchasing carbon removal credits from startups with new approaches is very essential. It’s as important as buying carbon removal from leading companies with proven technologies.

She further noted that,

“Our dollars will allow them to scale up so they can provide customers with effective and affordable carbon removal solutions… We need as many innovative companies to remove over 200 years of emissions to save our planet.”

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Air Company Raises $30M to Ramp Up its Carbon Conversion Technology

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Air Company, a carbon technology and design company, has raised $30MM in Series A funding to scale up its carbon conversion technology.

The money lining up to fund early-stage carbon removal technologies is adding up so fast. After the giant tech companies revealed their almost $1 billion fund for carbon removal startups, millions of capital came rushing in.

But what is more interesting is the value created in capturing CO2 and converting it into a product. Just like what Air Company is doing that attracted $30 million capital investment.

Carbon Direct Capital Management led the round along with other venture capital firms. These include Toyota Ventures, JetBlue Technology Ventures, and Parley for the Oceans.

How Air Company’s Carbon Conversion Technology Works

The startup makes carbon-negative alcohols and consumer products out of thin air. It does so through its proprietary technology that transforms CO2 into impurity-free alcohols.

The converted alcohol is then used to make a variety of consumer goods. Some of them are the famous ones like carbon-negative Air Vodka, Air Spray hand sanitizer, and Air Eau de Parfum.

The company is using only three key inputs to create its innovative products – air (CO2), water, and sun. It uses 9% solar energy for the conversion process and 91% wind energy to power its production.

Here’s how Air Company’s carbon conversion technology works:

With its pioneer carbon technology, Air Company made the world’s first alcoholic beverage directly from CO2, Air Vodka.

According to its CEO and Co-founder, Gregory Constantine,

“Our goal is to integrate our carbon technology into every applicable sector to help combat the climate catastrophe… We’ll do this by providing people with a beautiful range of products made from captured CO2.”

Air Company debuted in 2019 and started with its first factory in Brooklyn, New York.

Where Will The Funding Go?

The $30 million growth capital will be for building the Air Company’s third factory. This is to ramp up its carbon conversion technology and CO2-derived alcohol production.

This new state-of-the-art factory will be home for its new commercial-scale carbon technology. By far, it would be the biggest factory to date.

Such scaling up is also part of the firm’s plan to expand into the industrial and aerospace sectors. For instance, it has worked with NASA for space exploration in making sugars and proteins from its CO2-derived alcohols.

Air Company’s pioneering system seems capable of scaling up across industries. If so, its carbon conversion technology can help tackle up to 10.8% of global CO2 emissions. This is roughly more than 4.6 billion tons of CO2 removed and avoided each year.

By using captured carbon and replacing CO2 taken out the ground, Air Company aims to really have an impact in addressing climate change.

By far, Air Company is not the only carbon technology that focuses on how to use captured CO2 to make new products. There are a couple of others, too, recognized by Elon Musk’s $100 million Carbon Removal XPrize.

Examples include SkyNano that is using captured CO2 to make parts of tires and batteries. Another one is DyeCoo that uses reclaimed CO2 to dye textiles, avoiding the use of chemicals.

When these carbon tech startups mature, we can all expect to see a growing sector called “carbon to value”. This space presents a double blow of removing carbon while creating additional value.

And one way to create more value to carbon is by reusing it as an ingredient for materials like cement or consumer goods.

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What is the Best Carbon Credit to Buy? A Buyer’s Guide on Different Types of Carbon Credits

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A lot of people and organizations nowadays consider offsetting their emissions by buying carbon credits.

Unfortunately, it’s quite hard to know which carbon credits are effective and which ones aren’t. Also, the quality and price of the carbon reduction or removal processes involved may vary a lot.

Hence, we’d like to address the confusion about this concern through this guide article. It will help potential carbon credit buyers and other people interested in the space.

Why Do We Need to Buy Carbon Credits?

There are approximately 2.5 trillion tons of carbon equivalents released into the atmosphere since humans started emitting CO2. And still, we continue to release 50 billion tons of CO2eq each year, making global warming a dire concern.

So, individual leaders and companies around the world agreed to limit warming to a critical 1.5°C.

Massive GHG emissions reductions are vital so as not to exceed such a limit. Hence, people and businesses are taking drastic decarbonization measures to reduce emissions.

But reductions alone are not enough. We still need to remove a lot of carbon from the air to prevent catastrophic climate change. This entails stopping emissions and removing at least 6 billion tonnes of CO2eq per year by 2050.

The following chart shows how the world can reach net-zero by 2050.

Source: IPCC Climate Change Report

How to Buy Carbon Credits: Compliance vs. Voluntary Carbon Markets

It’s clear that for the world to continue doing business, offsetting emissions either by reduction or removal is a must.

How do you buy carbon offsets for your personal or organizational emissions?

There are two major means to do that. You can buy carbon credits through the compliance/regulated market or the voluntary carbon market (VCM).

Compliance or regulated carbon market

This carbon market is born out of the laws mandating reductions. It’s managed by emission trading systems (ETS) such as the EU ETS.

The compliance carbon market is also called the cap and trade system that dwarfs the size of the VCM. For 2021, the compliance market value hit $851 billion while the VCM reached its target value of $1 billion.

The cap and trade system is well regulated and seems to be more stable than the VCM.

Voluntary carbon market

The VCM has been operating for many years now but it grew so fast due to the Paris Agreement, calling on drastic corporate net-zero pledges.

In fact, governments and corporations had committed over USD 14 trillion in carbon credit sales.

Entities need to do various decarbonization actions to net their emissions to zero. The most common way is to buy carbon credits that correspond to the amount of CO2 emissions reduction allowed.

For the purposes of this guide, we focus on the VCM due to its rapid growth but lack of transparency and confusion in buying carbon offsets in this market.

Purchasing Carbon Credits in the VCM

Issuance of carbon offsets in the VCM is either through the carbon reduction or CO2 removal pathway. Here are the most common pathways for both options of buying carbon credits.

Carbon Reduction Pathway:

Carbon credits issued via this pathway mean the emitted CO2 is still hanging in the air. This is because the carbon offsets include an emission avoidance relative to an entity’s baseline emission. The amount of reduction needed is based on the current total emissions.

There are different types of carbon reduction credits available right now. But here are the three major ones worth considering.

Community-based energy efficiency: bio-based energy sources like biogas and clean cooking solutions.
Renewable energy: replacement for fossil fuel energy sources (hydro, solar, wind, and geothermal).
Forestry-based avoidance (REDD+): management and conservation of forests to cut emissions.

Carbon Removal Pathway:

Unlike carbon credits that reduce emissions through green projects, carbon removal is different. It sucks in CO2 from the air using different processes and stores it underground for good. Hence, the net effect is zero or even negative.

The following are the three common carbon removal types and their corresponding technologies:

Types of Carbon Removal 
Available Technologies/Projects

Nature-based removal and storage/use

Afforestation and reforestation
Soil carbon sequestration
Blue carbon habitat restoration
Seaweed and algae cultivation and burial

Technological removal and storage/use

Direct air capture (DAC) and storage/use
Enhanced weathering
Concrete building materials
Hydro-carbon fuels
CO2-enhanced oil recovery (EOR)

Hybrid removal and storage/use

Biochar
Bioenergy with carbon capture and storage (BECCS)
Building with biomass

Now that the major carbon reduction and removal pathways have been identified, it’s time to learn how to assess them using a set of criteria.

Criteria for Evaluating Different Carbon Credits

There are four evaluation criteria that carbon credit buyers can use to guide their purchasing decision. These are additionality, permanence, measurability, and sustainability.

Let’s break down each criterion and discuss it in detail to guide you well.

Additionality: likelihood to sell the credits

A carbon reduction or removal is “additional” if it would not have happened without the carbon credit market.

This criterion is crucial when evaluating which carbon offsets to buy. It affects the quality of a particular carbon credit. This is because buying credits to offset an entity’s own emissions may only worsen the climate if the reductions are not additional.

An essential concept when considering the additionality of carbon credits is the “likelihood to sell the credits”. It plays a decisive role in implementing the reduction/removal.

There is a catch, however, when determining the additionality of carbon credits. It’s subjective and its determination uses educated predictions only, not solid facts.

As such, deciding on this criterion is uncertain but it’s possible by considering the risk.

How likely is a specific project to be additional?

A project has no additionality if it would have occurred even in the absence of carbon credit. Conversely, it has high additionality likelihood if it will not probably be realized without the carbon credit.

By definition, most carbon removals today have high additionality as they rely on carbon credits to work.

Permanence: duration and risk of leakage

This criterion considers the fact that most CO2 emitted today will not be 100% removed later. About 25% of it stays in the air for over a hundred years.

Thus, buying carbon credits to offset emissions has one major challenge – its effects are very lasting. And so, high-quality credits are the ones that go with reductions/removals that are permanent.

For example, a carbon project that uses a forest to cut down emissions may not be permanent but temporary. This is because when a fire burns down the protected trees, the CO2 will be emitted back into the atmosphere.

In this case, a reversal of the bought carbon credits occurs and no net reduction really happens.

Thus, duration and risk level of leakage are the key concepts when considering the permanence of the carbon reduction/removal pathway.

Projects that have no or low leakage risk and last for over a century are highly permanent. But the ones that have a high risk of leakage and effects that stay less than 100 years are temporary.

Measurability: data availability and verification

This third criterion is also important in knowing the quality of carbon credits to buy. The reported reductions must be accurate and verifiable.

In particular, overestimation of GHG reductions should not occur. Otherwise, the measurability of the data won’t be reliable.

When evaluating a project’s measurability, here are the red flags to watch out for:

Overestimation of baseline emissions (reference against which reductions are measured)
Underestimation of actual emissions (results in overestimation of reductions)
Failure to account for projects’ indirect effects or unintended increases (leakage) in emissions
Forward crediting (credits issued for future reductions; may cause over-issuance of carbon credits)

To avoid those undesirable scenarios, it’s critical that project developers track and verify their data. This calls for scientific measurement and data collection verification through standardized processes.

Projects that have no data to verify have poor measurability while those with high-quality and verified data have good measurability.

Scalability: short term vs. long term

Lastly, a carbon reduction or removal project’s scalability depends on several factors. These include CO2 removal capacity, level of readiness for deployment, and cost-effectiveness.

Take for instance the case of direct air capture, a technological carbon removal.

DAC has the capacity to offer a more permanent CO2 storage than an afforestation project. Land availability is also not an issue with DAC but it’s energy-intensive and is not yet ready for scale-up.

On the contrary, afforestation is both ready to scale and capable of removing CO2 right now. But land availability might be a problem later on. So, evaluating a project’s scalability involves the aspects of short-run and long-run terms.

Projects have high scalability score if they are scalable both in the short-term and long-term. The ones that are scalable only in the short term have poor scalability.

The Price

One more crucial evaluation criterion when buying carbon credits is the price.

Unfortunately, there’s no single price per ton of CO2eq reduced or removed in the VCM like in the compliance market.

There are various factors that affect the price of credits in the VCM. The two major ones are project costs and the pathway’s value chain. The value chain aspect includes project developers, verification agencies, and the buyer.

Other key price influencers are the demand and supply dynamics. If demand exceeds supply, prices for high-quality carbon credits tend to be high.

Here is our live carbon pricing for the major compliance markets as well as for the big voluntary markets.

The Bottom Line

In summary, this guide focuses on the four quality criteria and the price of carbon credits for reduction and removal projects. These factors are very useful in evaluating which carbon credits to buy.

Yet, other considerations are to make when investing in carbon offsets. Here are some of them:

Credit availability – demand for high-quality credits is more than supply in the VCM right now
Own emission reduction goals – internal net-zero pathways
Other social and environmental impacts – nature protection and community livelihood creation

So obviously, there’s no single way to build a carbon reduction/removal portfolio. There’s a multitude of considerations to think about how and where to buy carbon credits.

But one thing to remember is that the pathways identified are all relevant for the world to be at net-zero.

It’s up to the emitter which ones are the best to invest in and be carbon guilt-free.

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