Beer Giant Carlsberg Aim for Net Zero by 2040

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Carlsberg Group unveiled its new sustainability targets which include achieving net zero emissions across its global supply chain by 2040.

Carlsberg has updated its environmental, social and governance (ESG) strategy with new climate-science aligned targets.

By 2030, the brewing giant also aims to achieve a 30% reduction in its beer-to-hand emissions.

Other major areas of focus under the new ESG program include zero farming footprint, zero packaging waste, and zero water use.

Cees ‘t Hart, CEO of Carlsberg Group, said that:

“We want to enable consumers to enjoy a great beer while leaving the smallest carbon footprint possible… To do this, we leave no stone unturned, from the grain and water that we brew with, to the recycling of empty bottles and cans once you’ve enjoyed your beer. This is the right thing to do, for our business and society.”

Carlsberg New ESG Program “TTZAB”

Dubbed ‘Together Towards ZERO and Beyond’, the firm’s new strategy serves as a roadmap to address its most material ESG matters in this decade and next.

TTZAB is an evolution of Carlsberg’s previous program launched in 2017 called Together Towards ZERO (TTZ).

Building on the TTZ, the brewer raised its zero carbon footprint ambition by maintaining its targets towards 2030 and introducing a new goal.

That’s going beyond with a new target to achieve net zero emissions across the entire value chain of Carlsberg by 2040. Under this new zero carbon strategy, the firm has the following targets:

The firm’s emissions are from two major sources: brewery and beer-in-hand.

Brewery emissions include Scope 1 (direct emissions) and Scope 2 (indirect emissions). They exclude in-house logistics and distribution operations. These are part of the beer-in-hand target.

The brewer said emissions from agriculture, raw materials processing, and packaging together account for over 65% of its total beer-in-hand emissions. This also refers to its value chain emissions from field to glass.

Those targets include Scope 1, 2 and 3 emissions from:

growing and malting raw materials; brewing, packaging, distributing and chilling products; and handling used packaging.

Here’s Carlsberg beer-in-hand emissions progress according to its recent ESG report.

Carlsberg Net Zero Pledge

To achieve its new net zero emissions targets, Carlsberg is focusing on 6 key actions.

Decarbonizing thermal energy usage: This is through converting boilers from using natural gas to using renewable thermal fuels or electrification.

On-site renewable electricity: Ensuring that any additional renewable electricity comes from on-site renewable electricity generation or is procured through Power Purchase Agreements.

Regenerative agricultural practices: Ensuring that cultivation of agricultural raw materials are through regenerative agricultural practices. They improve the ability of soils to capture and store carbon naturally.

Circular packaging systems: Ensuring packaging systems are fully circular and their production is decarbonized.

Electrified vehicles: Ensuring short-distance transport vehicles are electrified while long-distance vehicles are powered by renewable fuels.

Efficient cooling: Ensuring cooling equipment is increasingly efficient and powered by renewable electricity.

Since 2015, Carlsberg has reduced its total (absolute) emissions by 29%, saving 246,000 tonnes of CO2.

The company was also able to reduce emissions at its breweries by 40% per hl (hectoliter) beer produced since 2015. At the same time, it managed to cut emissions of glass bottles by 90%.

In 2021, one of its breweries in Switzerland invested in a heat pump that saves 400 tonnes of carbon and 100,000 hl of water a year.

Packaging holds the largest share in Carlsberg’s total emissions (41%).

This is why the firm plans to execute the circular packaging solutions.

By 2030, the firm targets to use 100% recyclable packaging across its chain, collecting, and recycling 90% of bottles and cans. It also plans to reduce virgin and fossil-based plastics by 50% and use 50% recycled content in making bottles and cans.

Lastly, as the company buys most of its barley through open markets, it doesn’t have a strong influence over how the plant grows. But it works directly with barley growers where the firm runs its own maltings to promote sustainable farming practices.

That includes techniques that use low or no tillage to boost biodiversity and soil fertility. It also helps cut emissions by eliminating ploughing and minimizing soil disturbance.

Carlsberg new net zero emissions targets are part of its wider corporate strategy. The brewer called this a “key mechanism” for abating risks and driving positive change.

Carlsberg join the growing number of brewers that are making new zero commitments. Heineken last year released plans to reduce its scope 1 and 2 emissions by 90% by 2030. and aims to go to net zero from barley to bar by 2040.

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Tonne Year Accounting for Temporary Carbon Storage

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You most likely know the climate benefits of storing carbon and removing gigatons of it from the atmosphere to limit climate change.

But we also bet that you don’t clearly understand how much carbon storage provides value to meeting climate goals.

That’s understandable because there’s currently no single framework for thinking about the climate benefits of temporary carbon storage. Temporary means less than a century of carbon storage.

Several factors affect how carbon accounting is done such as the time horizon over which value is calculated.

Most people equate the benefits of carbon storage with the impacts of CO₂ emissions. For instance, different years of storage (10 yr, 50 yr, or 100 yr) are used for representing offset credit to justify the emission of a tonne of CO₂.

But there’s a growing interest in one family of carbon accounting methods called tonne year accounting (also referred to as “ton-year” accounting). It values carbon storage based on its duration.

Firms use this method to bundle short-term carbon storage into carbon offsets designed to offer permanent climate solutions.

Unfortunately, various tonne year accounting methods provide different interpretations. This makes it harder to know what’s the real value of temporary carbon storage.

This article will explain how tonne year accounting works and what assumptions it should have when valuing temporary carbon storage.

There are also some examples of the most prevalent methods to know their differences.

Breaking the Tonne Year Accounting Process into Steps

Tonne year accounting is a family of methods for measuring how many tonnes of CO₂ stored physically equals to avoiding CO₂ emission in the first place.

In other words, it quantifies the climate impacts of carbon emissions with two things:

The amount of CO₂ involved and
The time CO₂ stays in the atmosphere.

This accounting method claims that a larger amount of CO₂ stored for a shorter period of time can claim equivalent climate outcomes. And the same also goes for a smaller amount of CO₂ stored for a longer period of time.

Here’s how tonne year accounting works in five basic steps.

#1. Specify a unit

The very first step to do is to specify a unit that considers both the number of tonnes of carbon stored as well as the time over which they’re stored.

Concept defined: a tonne year refers to 1 metric ton (MTCO₂) of carbon dioxide held somewhere for 1 year.

For instance, a mangrove tree that holds 1 MTCO₂ for 5 years provides 5 tonne years of carbon storage. But if that same tree can hold 2 MTCO₂ for 10 years, then it delivers 20 tonne years of carbon storage.

#2. Choose a time horizon

The second step is to know how to value the costs and benefits of storing carbon that happen in the future. This is possible by deciding on a time horizon. Doing this is a normative or typical choice rather than scientific.

The shorter the time horizon, the more valuable temporary carbon storage will seem.

#3. Get the tonne year cost of emission

After specifying the unit and choosing the time horizon, you can now calculate the climate impact of emissions in tonne years.

If an emission “costs” X tonne years, then tonne year accounting suggests that you can get carbon storage providing X tonne years of benefit to offset that mission.

When CO₂ stays in the atmosphere permanently, the impact of emissions in tonne years will be:

quantity of CO₂ emitted   x   time horizon chosen

So, if there’s 1 MTCO₂ emitted for 100 years, that’s equal to 100 tonne years.

But atmospheric CO₂ concentrations aren’t affected by emissions alone. In practice, knowing the cost of emissions has to take into account also the parts of the global carbon cycle that remove CO₂ from the air.

For example, if 1 MTCO₂ is emitted and removed from the atmosphere by natural processes over 4 years.

In the first year, the 1 MTCO₂ equals 1 tonne year of emissions impact. In the next year, there’s only 0.5 MTCO₂ that results in another 0.5 tonne years of impact.

Following the same logic, impacts for year 3 and year 4 are 0.3 and 0.2 tonne years respectively as shown below. Summing all the impact over the 4-year time horizon results in a total cost of 2 tonne years.

#4. Calculate the tonne years of carbon storage solution

This is important when comparing the tonne year cost of emissions with a temporary storage project.

There are various methods for calculating this benefit, but the two most common models are the Moura Costa and Lashof methods.

Here’s how the two methods differ in coming up with the carbon storage benefit calculation.

The figure below shows how the two approaches differ in getting the benefit of temporary carbon storage in 4 years. Moura Costa calculates 2 tonne years while Lashof only has 0.5 tonne year benefit.

#5. Determine how much storage is needed for offsetting

The last step in a tonne year accounting process is determining how much temporary storage you need to offset your emission. This is crucial when making an equivalence claim.

The answer is in an equivalence ratio: tonne year cost of emissions / tonne year benefit of temporary storage.

Using the above formula, the results vary in two methods with a 2 years time horizon.

Moura Costa accounting: 2 tonne years / 2 tonne years = 1 (equivalence ratio). This means storing 1 tCO₂ for 2 years can offset 100% of the emission.

Lashof accounting: 2 tonne years / 0.5 tonne years = 4 (equivalence ratio). It means only 25% of the emission can be offset by the project.

The results are significantly different, yet emitters can apply either accounting method and use it in determining the carbon offset that temporary storage provides.

Both of them can even be regarded as an offset equal to 1 MTCO₂, which can be an issue when offsetting emissions. 

Linking Tonne Year Accounting to Climate Impact

Tonne year accounting is used to calculate the correct equivalence ratio and relate it to the climate impacts that the entire world is experiencing.

Unlike the simplified example calculation provided above, this one calls for a more realistic situation on the effects of emissions on the atmosphere. This means considering the changes in the global carbon cycle due to emitting more carbon.

Naturally, oceans and other carbon sinks take up the extra CO₂ when their concentrations go up. This lowers the cost of the emission.

But instead of taking into account all those natural processes, tonne year accounting methods simplify things by treating emissions as a function of time represented in curves.

Those curves make it easier to know the impact of carbon in tonne years without using complicated modeling.

Rather than going through all the formulas used earlier, tonne year accounting lets you get the cost of emitting 1 tCO₂ by integrating the time horizon under a CO₂ emission curve. Refer to the figure below.

As shown above, tonne year accounting estimates the amount of extra heat trapped in the atmosphere due to emission. This leads to damaging climate effects such as rising sea-levels.

Alternatively, temporary carbon storage reduces warming. If the reduction balances out with the added emission, then tonne year accounting may claim the corresponding equivalence.

However, when balancing or offsetting climate impacts, the accounting method must take into account the timeframe when comparing tonne year results.

Though you can use a 10-year horizon, it may not represent the real climate impact of carbon. It can last for a much longer time in the atmosphere than 10 years.

Not to mention that there are other climate outcomes affected by emitting CO₂ at a given time. They particularly include the critical global warming limits of 1.5 or 2 degrees.

In a sense, storing 1 MTCO₂ today but re-emitting it many years later will only kick the can down the road.

Once the temporary storage ends, how should an emitter take this into account towards long-term climate goals?

Sadly, tonne year accounting can’t address the concern. It simply takes into consideration the added heat trapped in the atmosphere – also called cumulative radiative forcing. For other climate impacts, this assumption does not apply.

Also notably, the Moura Costa method results in physical equivalence claims that don’t add up. It allows for the claim that temporarily storing 1 MTCO₂ justifies the emission of more than 1 MTCO₂ (1.91 MTCO₂).

That is not a defensible outcome; hence, it may not be useful in making equivalence emission claims.

Analysts prefer to use the Lashof accounting instead as it shows a defensible result when considering the cost of emission in tonne year as well as its benefit.

Making Sense of All the Elements with Examples

Regardless of the method, Moura Costa or Lashof, changing the input parameters can affect the value of temporary carbon storage.

For example, if the time horizon chosen is 1000 years, the cost of an emission is about 310 tonne years.

Lashof calculates that 1 MTCO₂ stored for 1 year will result in about 0.235 tonne year benefit. So, for the equivalence claims, you need to store about 1319 MTCO₂ for 1 year (310.161 / 0.235 = 1319.45).

Lowering the time horizon to 100 years, storage also reduces to 128 tCO₂ under Lashof accounting.

To make things clearer, we take the case of a company called NCX.

An independent analysis reveals that the NCX accounting method is identical to the Lashof method but with one critical difference – a 3.3% discount rate.

Applying the discount rate makes the accounting process more complex. The primary goal of tonne year accounting is to generate the physical equivalence claims. So, using a discount rate invalidates this claim.

Both temporary carbon storage and emitting CO₂ result in quantifiable changes to the Earth’s energy balance. This means we must compare them directly without discount rates.

By applying a discount rate, the entity makes an economic equivalence claim instead of a physical equivalence claim. So, if they market their credits as generating equivalent climate impacts, it may raise questions.

That is because using a discount rate allows for more climate impacts tomorrow in exchange for temporary climate benefits today.

Right now, carbon markets assume that all carbon credits justify ongoing CO₂ emissions on a physical equivalence claim.

For instance, an entity releasing 10 MTCO₂ needs to buy only 10 offset credits to negate the climate impacts of its emissions.

In such a case, using tonne year accounting with discount rates becomes inconsistent. So, whoever sells credits on this basis has to make its equivalence claims clear and transparent.

The tendency is for firms to overestimate the physical value of temporary carbon storage. If so, they issue more carbon credits than the climate benefits those credits can support.

NCX’s current accounting method does exactly that. A reconsideration may be necessary to avoid complications and proper accounting of an offset’s physical equivalence claim.

Key Takeaways

To wrap things up, here are the major points we can say about the use of tonne year accounting.

The different tonne year methods allow varying quantities of temporary carbon storage to be marketed as equivalent to 1 MTCO₂. So assumptions must be clear – time horizon or use of a discount rate.

It is only useful for equivalence claims about climate damages due to extra energy trapped in the atmosphere.

Equivalence claims made by some tonne year methods don’t match climate impact. They’re not useful in establishing climate-equivalence claims or issuing carbon offsets.

Application of discount rates within tonne year accounting can blur the real climate impacts of temporary carbon storage.

Temporary storage has a non-zero value, but it’s important to be open and transparent about both the risks and benefits that come when valuing it.

Overall, more work is necessary to establish a coherent framework for valuing temporary carbon storage.

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World Bank Affiliate IFC Backs Blockchain for Carbon Credits

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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.

In May this year, Ripple announced its $100 million commitment to help ramp up carbon markets using blockchain.

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.

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Decarbonizing the Steel Industry Through Green Pig Iron

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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.

To meet the Paris Agreement, emissions from steel and other heavy industries need to fall by 93% by 2050. And so steelmakers face high pressure to slash their emissions.

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.

By replacing coal with biochar, the green pig iron process can reduce emissions by up to 100% according to Tecnored, a subsidiary of mining giant Vale.

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.

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Hemp Carbon Credits

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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.

Not to mention using hemp for paper instead of wood also keeps trees in the forests where they can store more carbon.

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.

Verra also just released a methodology for biochar carbon credits.

Hemp and carbon credits

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.

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DeepMarkit Announces Inaugural Purchase Order for Tokenization of 150,000 Carbon Offsets with WILL Solutions

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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.

The PO arrives within a week after DeepMarkit launched its MintCarbon.io platform.

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.

Read Full News Release Here

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Malaysia to Open Voluntary Carbon Market Exchange

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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:

potential issuers,
project developers,
corporate buyers, (e.g. manufacturers, agricultural companies, financial institutions)
validation and verification bodies,
government agencies and others.

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.

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Breakthrough in Low Cost Biofuels from Biomass

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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.

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Australia to Merge Compliance and Voluntary Carbon Markets?

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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

The inquiry coincided with the recent government policy shift that will likely increase the demand and prices for ACCUs.

The Safeguard Mechanism

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.”

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