Amazon’s New Carbon Credit Label “ABACUS”

Amazon is testing out its new carbon credit label called ABACUS Verified Carbon Unit (VCU), which goes above and beyond Verra’s methodology and will focus on ensuring additionality, leakage, and durability standards in the market.

Trust has been at the center when dealing with the issues confronting the carbon market. Some buyers of carbon credits are afraid that they will not receive the emissions reduction those credits promise.

Same with other products, there are good and bad carbon credits. The good ones are from projects that result in actual and real removal or avoidance of carbon. The bad ones don’t deliver real and positive impacts.

The challenge for both buyers and sellers is to spot the difference. And this is what the new carbon credit label of Amazon will try to address.

Amazon ABACUS Verified Carbon Unit (VCU)

In partnership with Verra, Amazon unveiled their plan to create a label that they claim to bring a higher standard of producing carbon credits back in July.

The carbon credits the system will generate will satisfy additional standards already required from traditional VCUs. Verra said that ABACUS is the first VCU label that came from a 3rd-party working group.

That group comprises Amazon research scientists and experts at the University of California Berkeley, The Nature Conservancy, and other organizations.

Amazon’s inspiration for creating the ABACUS VCU label is to improve public trust in the environmental integrity of carbon credits. This is critical for the voluntary carbon market to grow.

The architect behind the new carbon credit label, Jamey Mulligan, gave a sneak peek of the Amazon ABACUS VCU. He said:

“It is the first carbon market label that reflects innovations in the carbon accounting itself. [We are] creating an incentive for project developers to road test new project design concepts and carbon quantification methodologies that, at the end of the day, are built to enable confidence that the credits represent what they claim.”

The new carbon credit label will focus on two project types – agroforestry and reforestation. That’s because additionality, leakage, and durability are hard to deal with in those areas. But the projects also have great potential for significant climate, social, and environmental benefits.

Mulligan noted that ABACUS will improve the story for each of those standards. And to qualify for that label, VCUs must come from projects verified by Verra’s afforestation, reforestation, and revegetation (ARR) methodology.

How ABACUS Differs From Traditional Carbon Credits


One way that ABACUS VCUs are different from the existing credits available on the market is how they account for additionality. The label will require project developers to consider additionality at the start of the project.

Rather, they have to track changes in the project’s carbon stock over its lifetime while comparing it continuously to a baseline. This practice uses what they call a dynamic baseline to evaluate additionality.

In Mulligan’s words,

“Essentially, projects have to outcompete matched control plots in the surrounding landscape to maintain additionality. This effectively transfers the risk of future non-additionality, from the atmosphere to where it is today, to project investors, where we think it belongs.”


Another way that Amazon hopes ABACUS VCU will improve the credit standard is on leakage. It happens a lot when agriculture results in indirect land use change and loss of carbon.

ABACUS will prevent that leakage by supporting projects that make the rest of the degraded land or its nearby region equally productive. This will help maintain the agricultural production rate of that location.

The new label believes that carbon removal projects must not come at the expense of food production but must be engines of food security.


Lastly, climate solutions through nature have struggled to prove their durability or permanence. This is why buffer pools are created to cover for their potential losses due to wildfire or harvests.

ABACUS crediting will still use the same approach of pooled buffer accounts. But they will be from projects with high quality. And that tree species are better adapted to the project area.

Still on durability, the new scheme will cut down the crediting period from the standard 50 years to only 30.

Ridding of the last 20 years will have little impact on the investors’ financial outlook at the time of investment, said Mulligan. This, in fact, creates unaccredited removals that can compensate for partial losses, acting as another buffer pool.

Testing and Refining ABACUS

Though such changes in carbon crediting scheme sound promising, they need polishing. Amazon and Verra will work together to test and refine the ABACUS VCU label.

Verra completed a pre-consultation last October but ABACUS still needs testing on the ground with real and pilot carbon projects.

Plus, both organizations have to do a lot of work to ensure the success of ABACUS. And the key to that is trust and cultivating it on both sides, according to Mulligan.

A final decision on the proposed label will be due in January 2023.

The post Amazon’s New Carbon Credit Label “ABACUS” appeared first on Carbon Credits.

Christmas Tree Carbon Emissions: The Real vs. Fake Breakdown

“Paper or plastic?” was the old supermarket question, and it still rolls around every year at Christmas. But when it comes to carbon emissions of a real or fake Christmas tree, the debate can get heated.

Specifically, there’s an intense discussion around the idea of which is better for the environment.

Trees – the real kind – are, after all, carbon sinks. Cutting one down to place it in your living room for a few weeks seems wasteful. 

On the other hand, replacing something all-natural and all-organic with yet another non-recyclable, plastic imitation feels as un-green as it can get.

So, when it comes to Christmas tree carbon emissions, which is worse – paper, or plastic?

The Real vs. Fake Debate and CO2 Emissions

The debate about “environmentally friendly” Christmas trees boils down to one important stat: CO2 emissions. 

On the surface, the debate seems to favor fake trees. If real trees are carbon sinks, cutting them down provides one less way to lock away atmospheric carbon. And that’s one more way to release that CO2 back into the air.

But as it turns out, things aren’t that simple regarding trees.

Manufactured or Grown?

In the U.S., there are about 25 to 30 million real Christmas trees sold every year, according to the National Christmas Tree Association

Also, there are nearly 350,000 acres in production for growing Christmas Trees in the U.S.; much of these productions preserve green space.

When it comes to growing Christmas trees, the time can range from 5 to 15 years to grow a tree depending on the growth conditions. But on average it takes 7 years to grow a 6-7 ft Christmas tree.

Cutting down trees sounds bad, but making them might be even worse. A closer look at average carbon emissions for both real and artificial Christmas trees paints a clearer picture.

CO2 emissions for a real Christmas tree: Keep the carbon locked away

Time for the headline stat: 0 kg of CO2.

That’s the amount of CO2 your annual Christmas tree releases if you cut it, use it, then chip it up (using renewable power) and spread it on your garden.

Why nothing? Because trees lock away carbon primarily in their trunks.

True, forget to water the tree after you’ve brought it in, and you’ll see needles everywhere. But even when those needles decay, the CO2 they release is negligible. It’s the trunk and branches that matter after all.

And if you grind those up at the end of Christmas, you produce long-lasting bark mulch that releases CO2 very slowly over several years as part of a natural process.

Of course, not everyone has a wood chipper around to dispose of their tree. Toss your old tree in the landfill, and the resulting decomposition (which releases methane, as well as CO2) results in about 16 kg of CO2e per 6.5-foot tree.

It’s actually better to simply burn your old Christmas tree. This is a simple one-for-one exchange, as burning the tree releases all the CO2 it had absorbed over its life – for an average Christmas tree, roughly 4 kg of CO2. Burning does not result in the extra methane emissions, making it a more emissions-friendly option.

By far the best option is to use a potted tree. Bring the same one in, year after year, or plant it and purchase a new one to repeat the process – and kickstart your own personal Christmas tree offset program.

Carbon emissions for a fake Christmas tree: Production footprint

What about fake trees?

On the plus side, there’s no methane from decomposition, and no release of CO2.

But that’s about as good as it gets. Fake trees are generally made from plastic and metal. Both of them traditionally rely on carbon-intensive manufacturing methods and account for roughly 70% of a plastic tree’s carbon footprint.

Moreover, between 80%-90% of the artificial Christmas trees sold each year in the US – somewhere around 10 million trees – are produced in China. To calculate the true carbon footprint of your average artificial tree, you also need to include transportation and production costs.

That’s why the average artificial tree carries a carbon emissions cost of around 40kg, compared to the 3.5-16kg per real tree. 

At the end of the day, artificial trees are largely plastic. Oil-based production plus global shipping costs tend to result in high carbon emissions.

Real Christmas Trees: Ongoing Reforestry Offsets

To make the Christmas tree carbon emissions math work, each fake tree would need to be reused between 4-10 times before it resulted in less emissions than a real tree. 

And even if that were the case, artificial trees would still take up space in a landfill, without the benefit of being biodegradable.

In contrast, for every Christmas tree cut down, around another three trees are planted each year. 

Real trees result in lower shipping costs and reduced emissions from transport in comparison to artificial trees: the average real tree travels a little over 200 miles from source to final destination, while plastic trees can cover over 8000 miles on their trip from manufacturing in Asia to other global markets.

The Christmas tree industry operates as a market-induced carbon offset mechanism. Thousands of Christmas tree farms sequester as much as one tonne of carbon per acre. And trees are generally replanted as fast as or faster than they are cut. 

Christmas tree co-benefits:

Supports local farmers and producers
Encourages young-growth forests (trees are typically cut after seven years
Easy to recycle
Filters air and produces oxygen while inside
Can be used in aquatic or riparian environments to encourage diversity

The result is a carbon-neutral industry that removes nearly as much CO2e as it emits. Even The Nature Conservancy acknowledges that the real Christmas tree industry plays a vital role in the push for forest restorations that could account for 30% of the carbon emissions reductions the world desperately needs.

Not to mention that the great Christmas tree industry employs ~100,000 people in 15,000 farms across the U.S.

But in the end, the answer is pretty simple; when it comes to Christmas tree carbon emissions, pine beats plastic every time.

The post Christmas Tree Carbon Emissions: The Real vs. Fake Breakdown appeared first on Carbon Credits.

Major Airlines Ditch Carbon Offsets, Focus to SAF

Carbon offsets are one of the ways to help airlines in their race to net zero emissions. But recently, two major airlines – JetBlue and EasyJet – opted to stop carbon offsetting and focus on other ways to lower their carbon footprint by ramping up their use of sustainable aviation fuel (SAF).

With few other technologies commercially available, most airlines chose carbon offsets for their net zero strategies. According to S&P estimates, airlines will rely on offsets to decarbonize about 97% of their operations by 2025 but that will go down to 8% only by 2050.

Low carbon technologies come into play and SAF shows a promising trend.

Cutting Airlines Emissions with SAF

Some airlines now see SAF as a way to ramp up their decarbonization goals. Current estimates by the International Air Transport Association (IATA) show that SAF will account for about 65% of mitigation needed by the aviation sector.

The IATA estimated that total SAF production will reach 450 million liters in 2022. That’s over a 3x increase over the 2021 production of 100 million liters.

Here’s the growth of SAF production to date as per the IATA data.

To date, over 450,000 commercial flights have been operated using SAF. And the growing number of airlines signing agreements with SAF producers sends a clear market signal that this low-carbon fuel is in demand. Two recent examples are JetBlue and EasyJet.

JetBlue Ramps Up SAF Uptake

JetBlue Airways, a major American low-cost airline, pledged to reach net zero by 2040 using six methods including SAF and a massive carbon offsetting program. The airline first used carbon offsets in 2008, using the proceeds to support projects like wind power development, methane gas capture at landfills, and reforestation.

But it recently announced that it will quit buying carbon offsets for its domestic flights in 2023 and decided to focus on using SAF instead.

JetBlue considers carbon offsets as a powerful tool that enables them to tackle emissions immediately when developing a longer-term reduction plan including SAF. The airline’s director of sustainability and ESG Sara Bogdan said in an email that:

“The time is now to maximize investment into the space [green fuel] and accelerate our uptake of SAF…”

The US carrier revealed the shift as part of its wider commitment to cutting GHG emissions from jet fuel by 50% per revenue ton kilometer by 2035 from 2019 levels. This reduction is its most aggressive near-term target, the airline said.

Yet, JetBlue is not giving up on carbon offsets completely. It will continue to buy a small quantity of high-integrity carbon credits for flying from 2024 and to offset emissions from expanding international flights. The airline will work with experts to deal with issues on carbon offsets and assess which bring the biggest benefit.

Bogdan further added that “we do see an opportunity for greater transparency from the carbon credit market.”

The airlines has been using SAF for some flights since 2020 under supply agreements with Neste and World Energy. It has also signed deals with three more SAF producers with the plans to convert 10% of its fuel to SAF by 2030.

The US carrier joins Swiss EasyJet, which in September said will ditch carbon offsetting by the end of this year. It will opt to use SAF, too, as part of its roadmap to net zero emissions by 2050.

EasyJet Shifts to SAF

EasyJet was one of the first major airlines to offset all of its emissions when it introduced the program in 2019. The company said it had offset about 8.7 million tonnes of emissions since then.

But the carrier decided to use its money to invest in new technologies from fuel-efficient aircraft to switching to greener fuels like SAF. This shift will reduce its emissions by 78% by 2050, while the 22% cut by using carbon capture technology.

The Swiss carrier’s CEO Johan Lundgren remarked:

“Our carbon offsetting programme has been the right thing to do . . . [but] you need to deal with your own operations, you cannot rely on out-of-sector initiatives. It makes much more sense to invest into direct initiatives that reduce our own carbon intensity.”

But the airline said it will still allow customers to pay to voluntarily offset their own emissions.

According to the Science Based Targets initiative (SBTi), offsets can only be used to compensate for a small portion of residual emissions that can’t be dealt with in the long term.

EasyJet’s and JetBlue’s shift to SAF contrasts with some airlines.

US carrier Delta Air Lines, for instance, spent $137 million to buy and use 27 million offsets last year. While British Airways claims that all its domestic UK flights are “carbon neutral” by offsets that cover these journeys.

As they race to net zero, airlines are using both carbon credits to offset their emissions and SAF to cut pollution directly at the core.

The post Major Airlines Ditch Carbon Offsets, Focus to SAF appeared first on Carbon Credits.

Oasification – Solving Water Shortages with Carbon

The rise and fall of countless civilizations are due to access to two things: water and carbon. Both are essential for sustaining flora and fauna.

When arable regions become a desert wasteland, it shifts capital and populations. The world just surpassed 8 million people, and in the next 15 years it is expected to grow by another billion people.

Being able to reverse desertification will unlock new regions for development.

While turning a desert wasteland into a lush green carbon oasis seem like a massive undertaking, it’s already happening across the globe.

First some basics.

Desertification is the long-term degradation of dryland ecosystems by human activities, indirectly through climate change or directly through bad land management or overuse.

+75% of the Earth’s land area is degraded
+90% could become degraded by 2050.
By 2050, the global economy could lose US$23 trillion through land degradation.
Globally, the world loses arable land the size of Saudi Arabia each year.
Climate change is estimated to reduce global crop yields by about 10% by 2050. Parts of Asia and MENA (Middle East and North Africa) could see their crop production cut in half.

Desertification is a causing factor in the early human migration off of Africa. They followed the water and trees, much like the animals did.

Desertification has been identified as one of the top 3 environmental challenges back in 1992.

About 1/3rd of the Earth’s land is covered by desert (as determined by precipitation). All continents have deserts, yet their types and sizes vary widely.

Deserts are frequently among the least populated places on earth since they are thought to have challenging living conditions.

The 5 Largest Deserts Regions In The World

Antarctic & Artic – 10.9 million square miles
MENA Region (Sahara, Arabian, and Syrian deserts) – 4.7 million square miles
North America’s “Big 4” (Great Basin, Mohave, Chihuahuan, and Sonoran) – 0.5 million square miles
Asia’s Gobi – 0.5 million square miles

The biggest non-polar region is the Middle East and Northern Africa (MENA), the host of the largest subtropic deserts in the world – the Sahara.

The Sahara Desert has grown by 10% since 1920, and a third of its current size is due to climate change.

The overall MENA region is divided into the have or have nots – minerals reserves, oil reserves, carbon reserves (vegetation), and water reserves.

The region is surprisingly flush with water resources although it’s deep underground.

The overall volume of “fossil water” is estimated to be over 4 billion barrels. That is over 100 times the annual renewable freshwater resources and 20x the freshwater stored in African lakes.

To get to this will need massive water drilling programs. Libya is building the “Great Man-Made River” the world’s largest underground network of pipes and aqueducts.

To extract this water resource, it needs to be economically viable, and carbon credits help tip the scales.

Water can help turn the deserts back into arable lands, this opens the immense potential for carbon credit generation from all the new greenery.

Carbon credit and biodiversity credits can improve the quality of life (in their region).

How do you control the temperature and climate?

The MENA region was once green and lush, but over time desertification occurred. There only remains a few oases serving as a reminder of the region’s former glory.

Fortunately, turning deserts back into arable regions can happen with proper planning and implementation of technology and nature-based solutions.

To stop the “spreading cancer” known as the Sahara Desert, a massive oasification project is already underway called the “African Great Green Wall”.

It’s an ambitious plan to develop a wide wall of trees to hold back the expanding Sahara Desert.

This 8,000 km natural wonder would cut across the whole continent of Africa from Senegal to Djibouti, affecting 11 countries along the way.

If completed, it would be the largest living structure on the planet. It’s 3x the size of the Great Barrier Reef.

The hope is that the trees will slow soil erosion, slow wind speeds, and help rainwater filter into the ground.

More fertile soils will help communities across the Sahel with land grazing and agriculture.

The African Green Wall hopes to reach its goal by 2030, but with funding drying up and regional disputes, its future remains in limbo.

African Great Green Wall’s execution has not gone as well as planned, with over 80% of the planted trees have died. Researcher Chris Reij stated:

“If all the trees that had been planted in the Sahara since the early 1980s had survived, it would look like Amazonia.”

Another MENA nation that is making major moves towards bringing back arable land is oil-rich Saudi Arabia.

Not too long ago the Middle East was a tropical paradise, and Saudi Arabia is working toward bringing it back to its former glory.

Saudi Arabia is the 9th most powerful nation in the world and one of the most water-scarce nations on the planet.

Surprisingly Saudi Arabia is behind only the U.S. and Canada for per capita water consumption. The Kingdom uses 4 times as much water as it can renew. Plus, it uses 2x the water of an average nation per capita.

Major conservation efforts are at work to protect their other vital resource as water is essential for making the region green again – and to go net zero.

Saudi Arabia has also announced “Vision 2030”, a project to diversify the economy and move away from its dependency on oil.

With the proceeds of their remaining oil, Saudi Arabia is now starting to drill for their next precious resource behind oil – water.

The more water they stockpile the greener their country and economy can be.

The image below looks like an alien crop circle, but these are essentially carbon crop circles.

This “Center Pivot Irrigation” technology was developed in the US and requires less water, resources, and maintenance.

Water is pumped up from underground river channels and aquifers from depths of 1km (0.6 mile).

Each circle will be able to generate carbon credits after the soil begins to take root again and as they begin to store more carbon (and water) in the plants and soil.

To give some context, in 1971, Saudi Arabia had only 3.5 million acres of arable land (0.7% of its total land mass). But in 2020, that ballooned up to 8.5 million acres – that growth is roughly the size of Slovenia.

Yet, they will run out of water underground eventually, so they need new sources of water.

Making Water from the sea and the sky

Constructing dams can capture the rainfall surges from storms to be used later. Countries have also been exploring making their own storms using “Cloud Seeding”.

Cloud seeding works by shooting salt flares into the clouds. As salt naturally attracts water, the water particles collide with others to help with rainfall.

Saudi Arabia is also the world’s biggest user of desalinating plants which turn seawater into freshwater.

They have announced the world’s first Solar Power Desalination Plant. This cutting-edge technology is the most efficient desalination project yet.

Carbon credits are now available for desalination plants that switch to renewable power.

Scientists are even working on creating carbon-negative desalination plants, so they suck up more carbon than they emit.

The concept is to take advantage of the magnesium by-product in the concentrated brine which the desalination plant rejects. This is still in the very experimental stages, but it could show some promise in the future.

Wind & Solar

Using large-scale solar and wind farms can create microclimates.

Large wind farms mix hotter air from above with cooler air below, which brings slightly more initial heat to the ground. The turbines also interrupt the smoothness of the desert wind. This slows the wind speed and traps that heat further.

The trapped heat changes the atmospheric conditions above and can double the typical rainfall (in lab simulations).

The rain helps plants grow, and as they begin to take root, they also provide more green cover. The green cover lowers the amount of sun reflected off the desert surface. And so, it helps bring in more rain.

Solar farms can decrease the amount of sun bounced back into the atmosphere even more.

By combining large-scale solar and wind projects, has the potential to change the local climate.

And Saudi Arabia recently announce they are doubling its investment in renewables.

They are planning massive projects using clean energy such as the world’s biggest solar thermal plant and the region’s largest wind farm.

These initiatives will heat up the ground temperature in the remote agricultural/carbon farm areas. They’ll also produce more rainwater, making it more and more like the lush tropics.

They’re also planning to create a massive climate-controlled futuristic and green megacity called NEOM, in another region of the country. This NEOM project will be carbon neutral and net zero water – more on the NEOM project here.

With the ability to purchase and fund carbon projects across the world, it raised the question “Are local carbon credits better?”.

The post Oasification – Solving Water Shortages with Carbon appeared first on Carbon Credits.

Climate Action Data Trust Launched

The World Bank, along with the International Emissions Trading Association (IETA) and the government of Singapore, launched a new carbon credit platform “CAD Trust” to clean up the market and integrate several registries.

The founding partners call the new global tracking system Climate Action Data Trust or CAD Trust. The goal is to bring transparency to the carbon credits market and aid countries to raise climate finance faster and more affordable.

President and CEO of IETA Dirk Forrister remarked:

“Today’s launch of the CAD Trust marks a significant step in the evolution of carbon markets. It will lead to the creation of a centralised, accessible and secure digital infrastructure that national governments and private businesses can rely upon as they expand carbon markets to meet their net zero goals. This system will provide the integrity and public trust necessary for scaling up investment in climate action…”

The Need for Transparency

Polluters can offset their emissions to achieve their net zero targets. Offsetting means buying carbon credits generated from projects that avoid or remove carbon from the air.

Governments have been struggling to come up with rules for trading compliance carbon credits. Still, projects are developed to produce those credits and governments are establishing registers to track them.

In the private sector, many initiatives have emerged to deliver credits for the voluntary carbon markets (VCM). Nonprofit registries like Verra and Gold Standard are accrediting and monitoring the credits.

But critics of the market continue to raise concerns over poor transparency, limited supply, and quality of the projects.

Enter the new carbon credit database and tracking system – the CAD Trust.

The Climate Action Data Trust (CAD Trust)

The CAD Trust seeks to fix those issues by integrating all the carbon credit project’s data in one place and making it available to the public for free. Its launch comes as the latest round of global talks on rules for carbon markets under the Paris Agreement’s Article 6 at the COP27 summit ended in deadlock, again.

Speculators warned that some countries are pushing for frameworks that can’t prevent double counting carbon credits towards climate goals.

Chandra Shekhar Sinha, Adviser of the Climate Change Group at the World Bank said:

“… We hope that CAD Trust becomes a critically important source of data by connecting registry systems of the voluntary and compliance carbon markets to bolster transparency and accountability in these markets to meet corporate needs and to further the implementation of the nationally determined contributions that sit at the heart of the Paris Agreement…”

CAD Trust evolved out of the Climate Warehouse initiative developed and managed by the World Bank. It’s a culmination of 3 years of work and prototyping of a series of simulations of carbon data aggregation. That involves 30 participating organizations, 11 national governments, and 58 testing sessions.

CAD Trust uses distributed ledger technology to create a decentralized record of carbon market activity. The aim is threefold:

avoid double counting
increase trust in carbon credit data, and
build confidence in carbon markets

The new initiative will engage with various governments as well as private organizations.

Their collaboration will help set the specifications for an open-source metadata system that can share information about carbon credits and projects across various digital platforms. This is to ease the future integration of multiple registry systems and make it easier for companies and countries to share data.

For instance, the new carbon credit platform will allow Bhutan to save around $1 million in market access costs. One of Bhutan’s Ministry of Economic Affairs officers said that “It really helps us leapfrog the entire learning process.”

He also added that using the CAD Trust of the World Bank means Bhutan can begin selling carbon credits in 2023. That’s one year earlier than if the nation hadn’t accessed the system.

The CAD Trust Council

The World Bank and partners also announced the formation of the CAD Trust Council. It will be in Singapore tasked to guide the strategic direction of the CAD Trust.

The Council consists of representatives from the following countries and registries:

United Kingdom,
Gold Standard,
American Carbon Registry, and
Global Carbon Council.

They will work closely with CAD Trust, give it strategic direction, and ensure it achieves its goals. A big part of that goal is to ensure that carbon credits are delivering promised emissions reductions.

The post Climate Action Data Trust Launched appeared first on Carbon Credits.

Voluntary Carbon Market Prices Collapse & Vanguard Exit Net Zero

Prices for carbon offsets in the voluntary carbon market had one of the worst days in their short history.

Nature Based Offsets (N-GEO) down over 20%.
Aviation (CORSIA Credits) down 8%.
Tech-Based Offsets down 22%.

After enjoying record-breaking carbon prices earlier in the year, liquidity is drying up in the carbon sector.

Vanguard, which oversees $7.1 Trillion in assets, also announced that they pulled out of the Net Zero Asset Managers Initiative (NZAMI).

NZAMI had 3 major goals with its initiative:

Work in partnership with asset owner clients on decarbonization goals. That’s consistent with an ambition to reach net zero emissions by 2050 or sooner across all assets under management (‘AUM’).
Set an interim target for the proportion of assets in line with reaching net zero emissions by 2050 or sooner.
Review our interim target at least every five years. Plus, a view to ratcheting up the proportion of AUM covered until 100% of assets are included.

In a statement, Vanguard said:

“We have decided to withdraw from NZAM so that we can provide the clarity our investors desire about the role of index funds… And about how we think about material risks, including climate-related risks—and to make clear that Vanguard speaks independently on matters of importance to our investors.”

Vanguard’s decision to walk out of the world’s largest climate-finance alliance marks the biggest defection to date. Earlier this year, pension firms and an investment consulting firm exited GFANZ.

After that, JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley were considering defection after Race to Zero, a UN-backed entity that underpins GFANZ, mandated members to “phase down and out unabated fossil fuels, including coal.”

Vanguard’s move was made after a “considerable period of review.” And that’s based on a desire to maintain the freedom not to restrict its investment options, they added.

Legal Risks of Failing to Meet Net Zero

Concerns on legal risks are justified because if firms fail to reach their net zero pledges, they could face serious consequences. That may be in the form of significant litigation costs, huge financial penalties, and negative publicity, according to legal advisors.

A founding partner of the NZAMI, VP of Ceres Investor Network commented on this saying:

“It is unfortunate that political pressure is impacting this crucial economic imperative and attempting to block companies from effectively managing risks — a crucial part of their fiduciary duty.”

It will be critical to see which companies follow Vanguard’s exit, or whether they maintain their commitments. And how that will further impact voluntary carbon market prices.

The post Voluntary Carbon Market Prices Collapse & Vanguard Exit Net Zero appeared first on Carbon Credits.

London Stock Exchange Names First Fund to Trade Carbon Credits

The London Stock Exchange (LSE) welcomes the first fund to use its new market framework for carbon credits, the Foresight Sustainable Forestry Co., to raise capital and transparency to the market.

The LSE is the first exchange to use a public carbon market framework to drive funding into climate mitigation projects that create carbon credits. It offers access for investors and companies wanting to buy carbon credits to offset emissions.

The Exchange has issued its first Voluntary Carbon Market (VCM) designation to Foresight Sustainable Forestry Company. It’s an investment company offering direct and liquid access to UK forestry and afforestation projects, with future exposure to the VCM.

London Stock Exchange Carbon Credits Framework

Individuals and companies can get carbon credits through intermediaries like brokers. But some of them find it hard to source information about the project and its developers. They may also be struggling to identify certain projects that suit their requirements and preferences.

This is why the London Stock Exchange launches its VCM to give investors easier access to information about carbon credits they seek to buy. The Exchange’s head of sustainable finance for capital markets division Claire Dorrian said:

“I think the overarching principle behind all of this is transparency through disclosure.”

The LSE VCM platform gives entities and individuals a means to raise funds and use the money on projects that cut GHG emissions. In return for their investments, investors and firms can get carbon credits in place of cash dividends. They can then use those credits for offsetting purposes and meeting net zero targets.

Demand for carbon credits in the VCM is growing as firms pledge to reach net zero and help abate climate change. The volume of credits traded last year is up more than 3x, from $520 million to about $2 billion.

LSE First VCM Designation

Foresight Sustainable Forestry Co. (FSF), a London-based investment firm, is the first to take part in the LSE new VCM platform. FSF invests in developing land for commercial forests, primarily in the U.K.

The firm’s current portfolio consists of about 9,700 hectares of UK standing forestry and afforestation assets. The carbon sequestered by its 27 afforestation sites equals to around 800,000 carbon credits under the Woodland Carbon Code.

If the current capital is deployed, FSF can create about 1 million carbon credits in its first wave of afforestation deployment. And in the year ahead using its LSE first VCM designation, the shareholders can elect to get carbon credits instead of cash dividends.

Foresight’s co-head Richard Kelly remarked that:

“We’d be looking to attract companies, and ideally companies with science-based, net-zero pledges, to join us as shareholders… By connecting investors with net zero ambitions to entities such as FSF that generate voluntary carbon credits, the launch of the VCM is a major milestone in the UK’s fight against climate change.”

He also added that the VCM designation means that the ever-growing number of climate-minded investors can easily and confidently identify sustainable solutions.

Investing in LSE’s Carbon Credit Market

Operating companies or investment funds on the LSE are eligible for the VCM. But they must meet all other requirements for the market on which they are listed. The Exchange operates the FTSE 100 and FTSE 250 indexes and provides financial data.

The LSE VCM designation requires issuers to perform disclosures relating to the projects they are directly or indirectly financing.

In particular, developers must disclose the percentage of their total assets invested in climate mitigation projects. They must also disclose the industry standards they follow to certify those projects.

Yet, LSE new VCM may come with challenges for those looking to invest in carbon credits. For example, they may find it difficult to make the narratives about their green investments if the credits they buy are linked to multiple underlying projects. In this case, disclosing information related to the project may be hard.

But the new market in the Exchange can address that challenge and how entities buy carbon credits. Yet, it may take some time for companies to raise funds.

As per Dorrian’s words “it’s going to take, I think, a little bit of time for the market to digest”.

The post London Stock Exchange Names First Fund to Trade Carbon Credits appeared first on Carbon Credits.

Hess Signs $750M REDD+ Carbon Credits Deal with Guyana

US-owned Hess Corporation entered a deal with Guyana to buy $750 million worth of REDD+ carbon credits from the South American nation in the next decade to support efforts in protecting its Amazonian rainforests.

Hess Corporation is a global energy company specializing in the exploration and production of crude oil and natural gas. It’s an industry leader in environmental, social and governance (ESG) performance and disclosure.

Hess is a major partner with ExxonMobil and CNOOC of China in Guyana’s offshore project, the “Stabroek Block”. It’s one of the world’s largest oil and gas discoveries near Suriname’s border.

The multi-year agreement with Guyana that runs from 2022 to 2032 is under the UN Reducing Emissions from Deforestation and Forest Degradation program (REDD+). It involves Hess’ purchase of 37.5 million REDD+ jurisdictional carbon credits (current and future issuances).

This is the second major deal the country has entered in the past decade. In 2009, Norway had agreed to provide $250 million to help ensure Guyana’s 18 million hectares of forest remains intact.

Guyana REDD+ Carbon Credits

The REDD+ carbon credits will be under the ART (Architecture for REDD+ Transactions) registry. ART operates a robust, secure, transparent electronic system to register REDD+ programs. It also records the issuance, transfer, and retirement of serialized verified credits.

The initiative seeks to incentivize governments to reduce emissions from deforestation and forest degradation, restore forests, and protect intact forests.

The REDD+ carbon credits Hess will buy from Guyana will be issued under ART’s REDD+ Environmental Excellence Standard 2.0 (TREES). The program quantifies, monitors, reports, and verifies emission reductions from REDD+ activities at a jurisdictional and national scale.

Remarking on the partnership, President Irfaan Ali said:

“As one of only nine national jurisdictions in the Amazon Basin, we said long ago that national or jurisdiction-scale action on forests, coupled with access to global private finance, could create solutions that benefit the peoples of forest-rich countries while also achieving global climate goals…”

He further noted that the deal represents a massive step forward in “showing the world that developing countries can lead the way to global solutions”.

The government also says it will pursue efforts to attract more partners in the carbon credits market as Guyana works to reduce harvests of forest resources in a country the size of Britain with less than 1 million population.

Avoiding deforestation is critical to the Paris Agreement’s goal to limit the global temperature rise to well below 2°C. It’s one of the major commitments at the COP26 summit where 130+ countries, including Guyana, pledged to end deforestation by 2030.

Officials in the U.S. recently announced plans to sanction Amazon deforesters.

Low Carbon Development & Net Zero

The deal is also part of Guyana’s Low Carbon Development Strategy (LCDS) 2030. It outlines how the country’s rainforest resources can help combat climate change while promoting a sustainable, low carbon economy.

Guyana’s ~18 million hectares of forests that can store about 20 billion tonnes of CO2e. Its LCDS 2030 serves as the small nation’s roadmap for preserving its forests while growing its economy, too.

At the signing ceremony, Hess Corp. CEO John Hess commented:

“Guyana is one of the most heavily forested countries in the world. We admire the efforts that Guyana has undertaken for years to protect the country’s forest, and provide a strong model for other countries, other businesses and other governments… We are pleased to support the country’s efforts to advance sustainable development and enhance the quality of life for its people.”

Buying REDD+ carbon credits from Guyana is a major part of Hess’ commitment to help address climate change. It’s also important for the company’s net zero emissions target by 2050. The deal adds to the company’s ongoing and successful emissions reduction efforts as laid out in its sustainability reports.

Around 30% of the $750 million investment from Hess will be for developing the Indigenous Amerindian communities. There are nine such tribes in Guyana which accounts for almost 10% of its total population.

The post Hess Signs $750M REDD+ Carbon Credits Deal with Guyana appeared first on Carbon Credits.

Investments in Nature-based Solutions Need $674B a Year by 2050

Investments into Nature-Based Solutions (NBS) have to be more than double their current levels, reaching $384 billion a year by 2025 and $674 billion by 2050 to deal with the global crises of climate change, biodiversity loss and land degradation, according to a UN report.

The UN report entitled the “State of Finance for Nature” said that doubling investments into protecting and managing the world’s ecosystems is the key to address those triple crises. The authors reveal that NbS are still significantly under-financed.

The report comes 10 days after the end of the COP27 and a week before the start of the UN Conference on Biodiversity (COP15 CBD) in Montreal, Canada. COP15 is where nations will try to agree on a deal to protect nature and wildlife from further losses and degradation.

Authors of the report said in a statement that UNEP urges governments to come up with an agreement at COP15 mandating countries to require the financial sector to align investments with nature-positive goals.

Investments in Nature-Based Solutions (NBS)

According to one of the authors who is the director of McKinsey & Company Robin Smale, Nature-based Solutions refer to:

“Actions to protect, conserve, restore, sustainably use and manage natural or modified terrestrial, freshwater, coastal and marine ecosystems, which address social, economic and environmental challenges effectively and adaptively, while simultaneously providing human well-being, ecosystem services and resilience and biodiversity benefits are all considered as nature-based solutions…”

The current global investments in NB$&%S are around $154 billion per year. But that amount has to increase to $384 billion by 2025 to tackle the triple crisis of land degradation, climate, and nature as the chart shows.

Last year, investments into nature-based solutions was at around $133. But this estimate will be altered as the scope of NbS and how they’re assessed keeps on changing, too. Take for instance the case of marine NbS; they are the newest inclusion to the report’s latest edition.

In contrast, investments from governments in economic activities that pollute the air are 3x to 7x higher than financing for NbS.

These subsidies are highest in the sectors of energy and agriculture estimated at $340 billion – $530 billion a year and $500 billion a year, respectively. The report suggested phasing out of these investments.

Nature and The Economy

The authors of the report further noted that:

“This report is a reminder that lots of short-term efforts to boost gross domestic product (GDP) by Governments… without paying attention to the fact that nature underpins many economies, will impose greater costs for both present and future generations in the years to come.”

In fact, about 50% of global GDP is dependent on healthy and well-functioning ecosystems. So, countries have to go beyond just the economics of GDP and consider the principles of natural capital accounting and circular economy.

According to one author, there are already trends pointing to that direction and considering nature in making investment decisions.

Meanwhile, the report also found that governments spend $500 billion-$1 trillion a year on potentially damaging subsidies. And with ~100 parties to last year’s biodiversity summit in Kunming, China, they weren’t able to agree to fund nature conservation efforts in poorer countries.

Over a decade ago in Japan, world leaders who signed a biodiversity pact in 2010 have set targets to cut loss by 2020. Unfortunately, none of those goals were also met.

NbS and Carbon Markets

The third major point of UNEP’s report was the need for private investments in nature-based solutions.

Financing from the private sector accounts for only 17% despite their pledges to reduce deforestation and carbon emissions. With this, the report recommended that private investors will have to “combine ‘net zero’ with ‘nature positive’.”

That means they must do the following actions:

Create a sustainable supply chain
Reduce activities that negatively impact climate and biodiversity,
Offset any unavoidable activities through high-integrity nature markets,
Pay for ecosystem services, and
Invest in nature-positive activities.

Closing the nature-finance gap means directing additional investments in ecosystem restoration, protection, and sustainable land management. The chart below shows how much financing NbS requires to meet the 1.5 degree scenario.

Carbon markets have a role to play in propelling private financing for NbS. And public investments can’t scale up soon due to several issues that governments face, said the report. So working on creating standards and ensuring integrity in carbon markets is crucial.

An officer from the UNEP noted that including NbS in the COP climate summit agenda wasn’t possible before. Making it to the cover text of COP27 and the upcoming COP15 in Montreal is a success.

Discussions on mitigation finance were still not enough but “ambition without finance does not lead to action” the officer said. Financial commitments are vital for negotiations to be in good faith, she added.

The report was released by the UNEP along with the Federal Ministry for Economic Cooperation and Development (BMZ) of Germany, the UN Convention to Combat Desertification (UNCCD) and the European Commission.

The post Investments in Nature-based Solutions Need $674B a Year by 2050 appeared first on Carbon Credits.