First ISSB Reporting Standards Are Out, What Investors Must Know

The International Sustainability Standards Board (ISSB) has published its first two finalized standards, the first ever set of global reporting standards for ESG investors. The standards pave the way for companies to report on and disclose their climate and sustainability.  

The standards are designed to be the foundation for a uniform and comprehensive global baseline of sustainability disclosures that investors have long desired. They mark the culmination of an 18-months long work. 

The New Era of ESG Reporting

The standards consist of two separate frameworks for climate and sustainability reporting. The framework for disclosing sustainability-related financial information is known as IFRS S1 while IFRS S2 is for climate information. 

Together, they usher in a new era of ESG – environmental, social and governance – reporting and disclosures in capital markets.

ESG became the banner for investors and served as their measuring tool in comparing companies. The term became the household name in the capital markets around the world, until a huge number of financial products and assets were labeled with ESG. 

Bloomberg estimated that global ESG will surpass $41 trillion assets in 2022 and $50 trillion by 2025

Apparently, ESG turned into a multi-trillion dollar business. But it was plagued with the issue of greenwashing or the mislabeling of ESG products. It’s the biggest concern, both for companies and more so for the investors.   

And so, the ISSB aims to address this issue and finally publish the long-awaited ESG reporting standards.

The ISSB frameworks will affect what information companies include in their financial reports, prompting them to reflect ESG risks. Also, they’re not new but build on the previous works of existing standards and frameworks, including the following:

Climate Disclosure Standards Board (CDSB), 
Task Force on Climate-related Financial Disclosures (TCFD), 
Value Reporting Foundation’s Integrated Reporting Framework, and 
Industry-based guidance from the Sustainability Accounting Standards Board (SASB). 

More importantly, the ISSB Standards will ensure that companies provide ESG information alongside their financial statements, within the same reporting documents.

And for the first time, they created a common language for companies to disclose the climate-related risks and opportunities of their prospects. 

ISSB Global Baseline for Sustainability Reporting 

The lack of a global baseline ESG reporting framework made ESG investing confusing to investors. But with the new standards, ISSB’s vice-chair, Sue Lloyd, said that:

“Investors can be confident that, when they compare companies, they’re doing that on a like-by-like basis when they’re making their investment decisions.”

Under the ISSB climate standards (IFRS S2), companies need to: 

Determine their GHG emissions, which include all sources – Scopes 1, 2, and 3 – according to the Greenhouse Gas Protocol unless called to use other measures.
Disclose the amount and percent of assets or activities prone to climate-related transition and risks.
Report on how much capital expenditure they spend on climate-related risks and opportunities.
Disclose whether or not they use internal carbon pricing and explain how.
Report on climate-related targets.

Under the ISSB sustainability standards (IFRS S1), companies have to: 

Report information significant to financial prospects that may affect their investment decisions.
Discuss how they will identify and monitor sustainability-related risks.
Explain governance processes to track sustainability risks.

The new ISSB Standards are also based on the concepts that underpin the IFRS Accounting Standards, which 140 jurisdictions require. The standards are applicable worldwide, establishing a truly global baseline. 

While the European Union has started their own standard-setting activities, the US Securities and Exchange Commission is still working on getting businesses to disclose their carbon emissions. The SEC requires companies to report on their absolute carbon emissions, including scope 3.

The Next Steps: Scope 3 Emissions

In finalizing the ESG reporting standards, over 1,400 comment letters were considered. And one major feedback on climate reporting is on Scope 3, which is challenging for most companies. 

Corporations need to map their entire value chain to report on their emissions. To address this concern, the ISSB gave companies one more year to report on their Scope 3 information. They also provided other support and guidance in measuring and reporting Scope 3.

Companies can start applying the final version of the ISSB reporting standards next year. That means the first reports using the frameworks will be available to investors in 2025. 

Companies can also focus on climate reporting first and disclose sustainability in the next year while countries can decide if they’ll make ISSB standards mandatory. 

Ultimately, the global standards will help improve trust and confidence in companies’ climate and sustainability disclosures to inform investment decisions.

The post First ISSB Reporting Standards Are Out, What Investors Must Know appeared first on Carbon Credits.

Lululemon to Recycle Textiles Infinitely with Plastic-Eating Enzymes

A plastic-eating enzyme by Australian recycling startup Samsara Eco found its way into the fashion industry through clothing giant Lululemon. 

Lululemon teamed up with the startup and held a minority stake in it, though the amount wasn’t revealed. This multi-year collaboration marks the Canadian athletic wear company’s first investment in a recycling company. 

More notably, it represents the fashion industry’s commitment to promoting new approaches that emit less carbon and recycle old textiles. 

Why Recycle Plastic in Textiles?

The fashion industry’s emissions account for about 10% of annual global carbon emissions, and that will increase by 50% by 2030. The industry is also using tons of plastic-derived textiles from petroleum.

Around 70% of the materials used in making apparel such as pants, skirts, jackets, and other clothes contain plastic, be it polyester, nylon, spandex, or acrylic. 

Unfortunately, very little of these plastic-derived materials go to recycling facilities. The US Environmental Protection Agency estimates that only 15% of them are recycled.

As much as 87% of discarded textiles, which are 90% reusable and recyclable, end up in landfills or incinerators. And demand for apparel continues to grow, meaning more plastics will be needed to make new clothes. 

That also means the fashion or apparel industry needs more plastic recycling efforts to avoid using virgin plastic materials. 

Currently, there are two major ways for fashion companies like Lululemon to recycle textiles: mechanical and chemical using solvents. Both options are problematic because the former approach doesn’t allow the recovered plastics to be recycled several times while the latter often uses too much energy.

This is what Samsara Eco, which raised a $37 million Series A round, addresses with its innovative enzymatic approach.

Samsara Eco’s Infinite Recycling Tech

Samsara Eco uses enzymes that can attack complex plastics (polymers) and revert them back to their original chemical composition (monomers). This is what makes the startup’s recycling technology infinite. 

It can make new, virgin-grade plastics without the need to use fossil fuels again. Plus, it also uses less heat to break down the textiles more efficiently, as per Paul Riley, Samsara Eco’s CEO. He further explained their company’s plastic recycling process using the enzyme:

“Our process can handle hard-to-recycle plastics, contaminated plastics, mixed plastics and plastics containing additives (like colors) again and again, and now textiles in a low-heat environment that is carbon neutral.”

Samsara Eco Plastic Recycling Process

Riley added that their enzymatic recycling technology can produce virgin-like plastics without trading off the environment. It has a low carbon emission and doesn’t need high temperatures to break down plastic waste.

Putting that in context, the enviro-tech startup can stop releasing 1 billion tons of carbon dioxide into the atmosphere annually. 

This matters a lot because manufacturing virgin plastics made from fossil fuels significantly contributes to global warming. And projections show that by 2050, the plastics sector will consume 15% of the carbon budget.

Samsara Eco aims to recycle 1.5 million metric tons of plastic each year by 2030. Right now, the world produces about 391 million metric tons of plastic a year and has a total of 8.3 billion tons of plastic waste.

Samsara Eco’s partnership with Lululemon will make the startup the first to infinitely recycle nylon and polyester. Together, these plastic materials comprise about 60% of apparel manufactured. 

Using the startup’s plastic recycling enzyme technology, Lululemon seeks to repurpose nylon and polyester blends from old apparel to make new collections. Voicing the fashion brand’s concern with plastic, especially nylon, Yogendra Dandapure of Lululemon said:

“Nylon remains our biggest opportunity to achieve our 2030 sustainable product goals. Through Samsara Eco’s patented enzymatic process, we’re advancing transforming apparel waste into high-quality nylon and polyester, which will help us live into our end-to-end vision of circularity.”

Other Textile Recycling Technologies

Scientists have been working on finding the most cost-effective ways to break down plastics for decades, particularly polyethylene terephthalate (PET).

Collaborative efforts and the use of artificial intelligence (AI) help ramp up practical applications of plastic-eating enzymes. 

A different team discovered a natural enzyme PETase that’s capable of degrading PET plastic while modifying it using machine learning. They called it FAST-PETase – functional, active, stable, and tolerant PETase.

Another startup, Circ, has also developed a unique hydrothermal processing technology for recycling blended textiles, like polyester-cotton blends. The Circ system uses hot water, pressure, and chemical solvents to recycle both materials, recovering 90% of the waste textile.

A Connecticut-based company, Protein Evolution, is also developing a similar enzymatic approach for recycling plastics. They turn leftover nylon and polyester from used textiles into materials for new collections.

These companies may also be eligible for earning plastic credits or carbon credits. Each plastic credit is equal to one ton of plastic waste that would otherwise have not been collected or recycled.

Companies can leverage plastic credits along with carbon credits to address their sustainability concerns. Many firms also consider plastic waste reduction as part of their net zero commitments.

Same with other circular economy approaches, Samsara Eco needs more years to scale up and commercialize its technology. But the kind of support from clothing giants and popular fashion brands like Lululemon is a great milestone. 

The post Lululemon to Recycle Textiles Infinitely with Plastic-Eating Enzymes appeared first on Carbon Credits.

TotalEnergies, Petronas, Mitsui to Develop CCS Hub in Southeast Asia

Energy major TotalEnergies has partnered with Petronas and Mitsui to develop a Carbon Capture and Storage (CCS) hub in Southeast Asia.

The partners will assess several carbon storage sites in the Malay basin, including both saline aquifers and depleted offshore fields. 

The agreement will take forward the initiatives outlined in their signed Memoranda of Understanding in 2022.

Tri-Party Deal to Decarbonize Asian Customers

The deal aims to develop a carbon merchant storage service to decarbonize industrial customers in Southeast Asia, one of the fastest growing regions of the world. 

Estimates of carbon storage capacity in the region are uncertain. But analysis shows that the theoretical capacity to store CO2 may surpass the region’s needs. Most of this capacity is in deep saline formations. 

CCS can help the fast-growing economies of Southeast Asia be on track to net zero emissions. According to the International Energy Agency, about 90% of energy demand growth of the region since 2000 has been met by fossil fuels. It is also home to large coal and liquefied natural gas exporters. 

Thus, CCS technology can be significant in helping Southeast Asia transition to an energy mix that aligns with climate goals. 

Carbon capture in the region needs to reach at least 35 Mt CO2 in 2030 to be in line with the 2015 Paris Agreement goals. By 2050, that capacity must exceed 200 Mt, with CCS deployed at scale across the fuel, industry and power sectors. 

However, developing a CCS value chain for hard-to-abate emissions in the region needs a specific regulatory framework and considerable investment. 

Achieving the level of CCS deployment shown in the chart above will need about $1 billion each year by 2030. This financial requirement needs international support, more debt financing, and substantial private-sector investment. 

First-of-its-Kind CCS Solution

The tri-party agreement among TotalEnergies, Mitsui, and Petronas will establish a “first-of-its-kind integrated CCS solution for industries in the Asia-Pacific region”, according to Petronas. 

Malaysia’s state-owned firm further noted that the deal shows Petronas’ commitment to turn the country into a regional CCS hub.

The strategic partnership involves all aspects of CCS development in the region, including:

Studying potential CO2 storage sites, 
Assessing maturing depleted fields and saline aquifiers for storage, 
Identifying potential customers, 
Determining the best technical means to transport captured CO2 from regional industrial hubs to Malaysia, and 
Creating the most appropriate legal and business structure for CCS commercialization in Malaysia. 

Remarking on the agreement, TotalEnergies CEO Patrick Pouyanné said that: 

“We will bring to the partnership our strong CCS expertise, anchored in Europe with a first integrated project in Norway due to start next year and several other projects that will contribute to meeting our carbon storage capacity target of ten million tonnes per year by 2030.”

For the Japanese oil firm, Mitsui will use its “expertise in the oil and gas upstream activities and extensive business networks” to contribute to the CCS hub project in Southeast Asia. 

TotalEnergies also entered into a separate deal with Petronas’ renewable energy subsidiary Gentari. They will develop renewable energy projects in the Asia-Pacific region. 

Their goal is to jointly create the 100 MW Pleasant Hills solar project in Australia and generate low-carbon electricity from it to deliver to Roma field’s gas production and processing facilities. This project will help cut the emissions of Gladstone LNG, in which both energy majors hold a stake.

The planned volumes and dates of the Malaysian CCS hub project weren’t revealed.

The post TotalEnergies, Petronas, Mitsui to Develop CCS Hub in Southeast Asia appeared first on Carbon Credits.

Pharma’s AstraZeneca Invests $400 Million to Plant 200 Million Trees

AstraZeneca, a global pharmaceutical leader, has launched a significant environmental sustainability initiative, AZ Forest. This ambitious project aims to plant and maintain 200 million trees worldwide by 2030, a commitment backed by a robust investment of $400 million.

This initiative is a part of AstraZeneca’s science-based net zero strategy, “Ambition Zero Carbon,” which employs advanced technologies for long-term monitoring of tree health, soil and water quality, biodiversity, and carbon sequestration.

The AZ Forest initiative is a testament to AstraZeneca’s commitment to environmental sustainability. By planting and maintaining 200 million trees, the company is taking a proactive step towards mitigating climate change and promoting biodiversity.

This initiative also underscores the company’s belief in the power of partnerships, as it involves collaboration with experts and local communities across the globe.

AstraZeneca’s Carbon Reduction Goals

AstraZeneca is committed to reducing its greenhouse gas emissions by 98% from its global operations and fleet by 2026. This target is a clear demonstration of the company’s commitment to environmental sustainability and its recognition of the role businesses must play in combating climate change.

Moreover, AstraZeneca aims to halve its entire value chain footprint by 2030. This includes emissions from all its activities, from the sourcing of raw materials to the distribution and use of its products.

The company’s ultimate goal is to achieve science-based net zero by 2045 at the latest, a target that aligns with global efforts to limit global warming to 1.5 degrees Celsius above pre-industrial levels.

How Much Carbon Does a Tree Sequester?

According to One Tree Planted, an average tree can absorb approximately 10 kilograms, or 22 pounds, of carbon dioxide per year for the first 20 years.

Factors such as tree species, location, growing conditions, soil nutrients, local climate, water availability, and sunlight significantly influence this absorption rate.

By using the conservative estimate of 10kg per tree per year, those 200,000,000 trees can potentially sequester 2 million tonnes per year.

This could go towards their own carbon insetting initiatives or they could potentially generate carbon credit, which could potentially yield substantial financial returns.

But that all depends on the price of carbon, the last year the price of nature-based credits went from around $18 a credit and is hovering just over $1.

If the price of carbon goes back up then these 2 million credits could hold considerable financial value.

Carbon Credits: A Lucrative Potential

Carbon credits are a key element of international carbon trading schemes, offering a way to offset greenhouse gas emissions. One carbon credit equates to the removal of one tonne of carbon dioxide from the atmosphere.

Given the potential of AstraZeneca’s 200 million trees to generate 2 million carbon credits per year, the financial value could be substantial, especially with the expected surge in demand for carbon credits.

The market for carbon credits is dynamic and influenced by a variety of factors, including regulatory policies, technological advancements, and market demand and supply dynamics.

As more countries and corporations commit to reducing their carbon emissions, the demand for carbon credits is expected to increase, potentially leading to higher prices and greater financial returns for carbon credit holders.

Beyond Carbon Credits: Ecosystem Services and Reputation

In addition to carbon credits, AstraZeneca’s reforestation initiative could yield other ecosystem services, such as water purification, soil conservation, and biodiversity preservation. These services have indirect economic benefits.

For example, healthy forests can regulate water flow, reducing the risk of floods and droughts. They can also provide habitat for a wide variety of species, supporting biodiversity and contributing to ecosystem resilience.

Furthermore, the initiative could enhance AstraZeneca’s reputation as a sustainable and responsible company. In today’s world, where consumers, investors, and other stakeholders are increasingly conscious of environmental issues, companies that demonstrate a commitment to sustainability can gain a competitive advantage.

AstraZeneca’s reforestation initiative represents a significant commitment to environmental sustainability and a strategic investment in carbon credits. It showcases the potential for corporations to contribute to climate action while also creating financial value.

Setting a Precedent for Corporate Environmental Responsibility

AstraZeneca’s reforestation initiative sets a precedent for other corporations to follow, demonstrating that environmental responsibility and business strategy can be mutually reinforcing.

By investing in reforestation and carbon credits, AstraZeneca is showing that it is possible to contribute to climate action while also creating financial value. This sends a powerful message to other corporations, encouraging them to also take steps towards environmental sustainability.

In conclusion, AstraZeneca’s AZ Forest initiative is a significant step toward environmental sustainability. By planting 200 million trees, the company is not only helping to combat climate change but also creating potential financial value through carbon credits.

This initiative serves as a model for other corporations, demonstrating that it is possible to contribute to climate action while also achieving business objectives.

The post Pharma’s AstraZeneca Invests $400 Million to Plant 200 Million Trees appeared first on Carbon Credits.

Eliminating Oil Supply: A New Paradigm in Carbon Credits Market

In the world of climate action, the primary challenge lies not only in formulating innovative solutions, but also in ensuring they provide robust, scalable, and cost-effective mechanisms for reducing global carbon emissions. Onyx Transition, a voluntary carbon crediting program, aims to do exactly that, offering a novel approach to tackle climate change – eliminating oil supply.

Onyx Transition has introduced a new credit type into the voluntary carbon market, known as the “elimination credit”. This credit has been developed based on the concept of “supply-side crediting”. It is a mechanism Onyx uses to tackle two of the most significant barriers to climate action: negative spillover effects and political opposition.

Meet the New Credit in Carbon Market: EOS Credits

The idea behind supply-side crediting and by extension, elimination credits, is to incentivize oil and gas companies to shut down economically nonviable fields and keep the fossil fuels in the ground permanently. 

Onyx offers these companies an alternative revenue stream in the form of credits that they can sell on carbon markets. The emissions that would have been generated by the extraction and combustion of these fossil fuels are thus eliminated.

The credits are also known as Eliminate Oil Supply (EOS) creditsThe credits’ ultimate goal is to accelerate oil decline to prevent the worst effects of climate change.

Though oil markets are showing a decline, it’s too slow and is trivial under the IEA’s central “Announced Pledges Scenario” (APS). A sharp contraction in oil demand is crucial to reach the 1.5°C scenario. That means 20% reduction by 2030 and 60% by 2040 as shown in the chart (in grey). 

Oil Demand Outlook Across Scenarios

Source: Onyx Transition

Eliminating the ‘Whack a Mole’ Effect 

Onyx’s novel approach stands in stark contrast to most climate policies that make emissions more expensive and mandate emission reductions. Most often, such strategies run the risk of triggering ’emissions leakage’. This refers to the phenomenon where cutting down emissions in one economy leads to those emissions popping up in another less ambitious country. 

Such a ‘Whack a Mole’ effect can undermine global climate action efforts.

Onyx’s solution of supply-side crediting can interrupt this emissions leakage, creating a more globally coordinated response to climate change. Simultaneously, this method generates revenue, which can be channeled into investments in low carbon technologies, accelerating the transition to a greener economy.

Another crucial aspect of Onyx’s approach lies in its ability to tackle political opposition, which is one of the most significant barriers to ambitious climate action. 

Fossil fuel producers, who stand to lose the most from decarbonization efforts, can become supportive stakeholders under the Onyx model. The prospect of receiving revenue from decommissioning fossil reserves offers a powerful incentive for their participation.

Highlighting the unique stance of elimination credits, Camila Stark noted:

“Onyx offers a compelling solution: incentivize fossil fuel producers to voluntarily shut in their uneconomic oil and gas fields, keep the oil and gas in the ground, and offer an alternative revenue stream through the sale of high-quality carbon credits.”

More notably, EOS credits target the most carbon-intensive assets (in blue). 

2040 Oil Supply Cost Curve, Demand Volumes Under Oil Scenarios 

Without intervention, those assets will continue to produce and grow profitably for the next 10-15 years. And that period is a critical window for climate action.

This is where a market mechanism such as the EOS carbon credits create an immediate, tangible impact at gigaton scale. Phasing out the full high carbon-intensive oil market will reduce 0.2 – 1.1 gigatons of CO2e annually. The actual reduction depends on leakage rates.  

Onyx’s emergence comes at a time when the voluntary carbon market is undergoing scrutiny for the quality and reliability of carbon offsets. Amidst this turmoil, the introduction of the elimination credit represents a beacon of innovation and hope. 

Racing Against Time

EOS credits offer a unique proposition to carbon markets and warrant robust pricing. In comparison to the existing high-quality credits available in the market, the exhibit shows how the elimination credit stands out.

Time value of carbon refers to actions that impact emissions today and can reduce the risk of climate tipping points. These actions have more value than actions done later. 

Unlike other credits such as DACCS, eliminating oil supply doesn’t require any technological advancement or have any supply chain limitations. 

In fact, it can ramp up now and deliver gigaton-scale impact this decade to help avoid triggering catastrophic climate effects. As Spencer Dale pointed out, “we are in a race against time and if the VCM is to address the climate crisis, so it’s important that we acknowledge the criticality of the time value of carbon.”

As for the question of permanence—which has been plaguing carbon credits credibility—Onyx addresses this via a three-pronged approach. They use legal, financial, and economic mechanisms to ensure that once a field is shut down, it stays shut down permanently.

As the market matures and buyers become more discerning, mechanisms that offer permanence, immediate impact, and robust protection against reversion risk, such as the elimination credits, are likely to become increasingly valuable.

Onyx Transition represents a paradigm shift in the carbon credits market. By focusing on supply-side crediting and offering an attractive alternative to fossil fuel producers, Onyx provides a compelling solution that aligns economic incentives with ambitious climate action. 

The post Eliminating Oil Supply: A New Paradigm in Carbon Credits Market appeared first on Carbon Credits.

Oregon County Sues BP, Chevron, Shell, Exxon for $51B Climate Damages

An Oregon county filed a lawsuit against oil and gas companies and industry, blaming them and seeking $51 billion in damages for the deadly 2021 Pacific Northwest heat wave that killed about 800 people.

Multnomah County, which includes Portland, sued 17 companies, including Shell, Exxon Mobil, Chevron, BP, among others. The county said these fossil fuel companies and other entities in the industry are the ones to blame for the deadly heat dome.

A heat dome event happens when a high-pressure system prevents cooler winds from blowing and also prevents clouds from forming. 

The $51 Billion Heat Dome Damages

Multnomah County is seeking $50 million from the defendants for actual damages from the 2021 record-breaking heat wave. Temperatures in the region reached 116°F, killing 69 people in the county. This is the hottest temperature ever recorded in the county’s history. 

The plaintiff also asked for $1.5 billion in future damages and $50 billion abatement fund to “weatherproof” the county. The fund will also be for public health services needed for future extreme weather events resulting from fossil fuel use. 

Emergency departments in the county were flooded with patients suffering from heat-related illness. 

Apart from Oregon, hundreds of people also died because of the event in Washington and British Columbia

Researchers composed of climate scientists said that the heat wave was due to excessive carbon emissions from burning fossil fuels. 

According to these climate experts, the 2021 heat dome was “virtually impossible” if not because of global warming. Their study showed that the heat wave was at least 150x less likely to occur if temperatures hadn’t heated that much caused by human-related carbon emissions.  

After the 2021 heat dome, the county has spent more to prepare for similar events in the future – expanding shelter, increasing supplies, and staffing up. 

Climate Lawsuits Against Big Oil 

The Oregon county accused the big oil companies, and other entities including McKinsey & Company, for committing negligence and fraud. They said the companies knew that their fossil fuel products will cause warming and will have a negative impact. Yet, they continue to deceive the public about it.  

As per their statement:

“We are confident that, once we show what the fossil fuel companies knew about global warming and when, and what they did to deny, delay and deceive the public, the jury will not let the fossil fuel companies get away with their reckless misconduct.” 

Oregon taxpayers paid for all the heat-related emergencies and expenses during the event, including air conditioning and cooling centers.

The Oregon lawsuit is similar to climate litigations filed by other local and state governments since 2017. It’s the 36th time a municipality has sued oil and gas companies for alleged damages caused by global warming. 

It comes after the US Supreme Court sided with Colorado’s governments demanding oil giants to pay for their climate damages.

Last year at climate summit, COP27, Climate TRACE, an NGO tracking emissions, analyzed 72,612 individual sources of CO2. Their study revealed that fossil fuel emissions could be up to 3x higher than what oil and gas companies claim. They found that 50% of the largest emitters are oil and gas fields.

According to an analysis, global carbon emissions from fossil fuels hit record high in 2022 as shown below, at 40.5 gigatons of CO2.

Source: Carbon Brief

Baseless, Unproductive Claims

In response to the lawsuit, Chevron’s legal representative said the claims are baseless and counterproductive in “advancing international policy solutions”. 

Shell also responded saying that the court isn’t the right venue in tackling climate change. Rather, this issue needs collaboration from all sectors and a “smart government policy” as the right way to find solutions. 

Exxon’s spokesperson said that this kind of lawsuit won’t be helpful in addressing climate change, and will just waste time and resources. The oil giant further stated that it won’t impact their commitment to invest billions to reach global net zero emissions. 

If big oil companies ended up paying the damages, it can make the cost of doing fossil fuel business more expensive, as per a climate law fellow at Columbia University’s Sabin Center for Climate Change Law.

In effect, alternatives to fossil fuels will be more cost-competitive. This may not be a direct effect of climate change, but it could be a crucial turn of event.

Multnomah County brought the lawsuit in state court and has secured outside lawyers for the case. 

The post Oregon County Sues BP, Chevron, Shell, Exxon for $51B Climate Damages appeared first on Carbon Credits.

What is REDD+? Development, Issues, and Solutions

Nature-based solutions are among the go-to options in fighting climate change and REDD+ always comes on top of the list. Individuals and organizations alike tend to prefer this solution while critics continue to doubt its credibility in reducing carbon emissions. 

So, to help you clarify confusions surrounding REDD+ and its corresponding emissions reduction claims, or popularly known as carbon credits, we’re going to talk about the essence of this program. 

From its origin to its current role in protecting our world’s forests as well as the challenges it faces, this article will explain REDD+ and everything that comes along with its successful implementation. 

Let’s start with the current state of the forests. 

How are Our Forests Right Now?

The state of forests worldwide varies depending on the region and certain factors such as deforestation rates, forest management practices, and natural disturbances like wildfires

The world’s forests account for 92% of all terrestrial biomass globally and store about 400 gigatons (Gt) of CO2. They take up carbon via photosynthesis and store it below- and above-ground. Different forest types store varied amounts of carbon, depending on the climate present in the particular location of the forest.  

Source: U.S. Department of Agriculture, Forest Service, Climate Change Resource Center

These forests are one of our great allies in preventing global temperatures from going up. Unfortunately, forest trees are cut down or burned drastically around the world. 

Deforestation is the biggest culprit of forest loss. 

Forests are cleared mainly for agriculture, urbanization, and logging, collectively called land use change. This causes not only deforestation but rising carbon emissions, biodiversity loss, and decline in wildlife species.

Deforestation is responsible for releasing as much as 5 GtCO2 a year, which is equal to about 10% of the global GHG emissions.

The worse-case scenario? Deforestation and degradation cause some forests to release more carbon than they sequester. 

Alarming wildfires are burning millions of hectares of forests in the U.S., Canada, and other parts of the globe. The record-breaking wildfires that engulfed boreal forests in North America and Eurasia emitted almost 2 billion tons of CO2.

The worst-case scenario? Forest loss will continue at the scale that will make the 1.5°C climate goal an impossible dream. This will happen if people find forest land conversion more profitable than keeping the trees standing.  

If deforestation in tropical forests were a country, it would rank third in CO2 emissions

All this means that if we don’t end deforestation as early as this decade, we won’t be able to stop climate change from wreaking havoc on our planet. 

Climate experts said that curbing deforestation is humanity’s biggest chance to immediately reduce carbon emissions. Many agree but others don’t. 

Still, governments devised various policies to bring financial incentives to conserve forests and avoid forest loss. They’re formally referred to as REDD – Reducing Emissions from Deforestation and Degradation

How REDD+ Evolve to Protect Forests  

The history of REDD can be traced back to the international efforts to fight climate change and preserve forests.

Two tropical countries brought the concept of REDD to global climate summits known as COP – Conference of Parties. Costa Rica and Papua New Guinea formally placed this topic on the table during the COP11 in 2005. 

Their idea received huge interest from other countries as a way to conserve forests by prompting performance-based incentives at scale. Why won’t it be if the initiative will promote sustainable forest management practices while making trees more valuable standing than logged.  

So, monetizing the carbon stored in forests through carbon credits provides local communities revenue for sustainably managing their forests. The income from the credits will deter them away from livelihood that causes deforestation such as illegal logging, crop cultivation, and livestock raising.

Here’s the timeline, and some dates to remember, of how REDD came about and expanded to REDD+. 

Global climate talks began in the ‘90s. The United Nations Framework Convention on Climate Change (UNFCCC), formed in 1992, gave birth to several international and national strategies to reduce GHG emissions. 
First REDD discussions in early ‘20s. Pilot discussions and projects exploring means to cut emissions from deforestation started to emerge in the early 2000s. Costa Rica and PNG were responsible for these first initiatives, calling for the need to develop a comprehensive framework. 
Bali Action Plan in 2007 (COP13): The UN COP13 in Bali, Indonesia, in 2007 was a significant milestone in the development of REDD. The conference put forward the importance of REDD in developing countries and emphasized the need for financial support to implement it. 

The COP13 parties added the “+”, expanding the term to REDD+. The plus simply refers to the co-benefits of protecting forests from destruction. It means the role of “conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries”.

The Warsaw Framework for REDD+ in 2013 (COP19). The 19th session of the COP in Warsaw, Poland in 2013 formally adopted the framework for REDD+. It laid out key principles, guidelines, and safeguards that REDD+ projects and activities should follow. The framework also rang the bell for financial and technical support needed by developing nations to implement REDD+.

Following the Warsaw Framework, many countries have established and developed their national REDD+ strategies and implemented projects on the ground.

What’s even better is that several organizations have shown support to REDD+ initiatives through financing and capacity development programs. 

REDD+ in the Carbon Credit Markets

At the end of 2022, there are over 620 individual REDD+ projects and programs implemented. Most of them are funded by international donor organizations, such as the UN-REDD and the World Bank. 

REDD+ countries are now focusing on operationalizing both their REDD+ strategies and proposals for bigger forestry programs. Their ultimate goal is to build investment packages that will result in carbon emissions reductions through results-based finance.

Though they only represent a smaller chunk of REDD+ financing, the voluntary carbon markets (VCMs) have been recognized as a good source of investments with REDD+ carbon credits

As of 2022, over 400 million REDD+ credits have been issued on the VCM, representing a quarter of total credits issued in the market. 

The majority of REDD+ projects are in South America, where forested regions are found, including the Amazon. Other forest projects are also in Sub Saharan Africa, Asia-Pacific, and Central America. 

By country, Indonesia has by far issued the most REDD+ carbon credits in 2022 with 76 million, according to Sylvera. That issuance is only from four REDD+ projects operating in the Asian country. 

What makes REDD+ carbon credits, also categorized as nature-based credits, desirable is that most of them deliver co-benefits. These are other societal and environmental benefits that forest projects provide apart from carbon reductions. 

In context, only less than a quarter of credits in the VCM have co-benefits while REDD+ projects have over 60%.

It’s no surprise, therefore, that REDD+ is always at the forefront of international climate change talks as a solution to avoid global temperatures shooting up. 

However, it is not immune to critics and skeptics. So, let’s take an inventory of the major issues surrounding the initiative. 

What is Shaking up REDD+? 

Accounting for the carbon reduced or removed by a REDD+ project is not that easy. And one of the most important things that affect how effective the project is baseline setting. 

Simply put, the baseline scenario is the condition of the forest without implementing the project. It’s often determined by observing deforestation activity in the adjacent areas and using it as a reference point.

Getting this proxy correctly, or as accurate as possible, is critical. It dictates how much carbon reduction the REDD+ project achieves. 

In a sense, projects must have baseline emissions that are conservative and not too aggressive so as not to overstate their climate benefit. It is for this very reason that REDD+ projects are criticized for underperforming, ineffective, and so generate worthless carbon credits. 

And then came the market’s biggest blow – The Guardian publication. The media’s article put a study questioning the forest projects certified by Verra, accusing them of using inaccurate baselines. 

The published article claimed that over 90% of the REDD+ carbon credits are “largely worthless” and are “phantom credits”. In other words, they likely don’t represent real emission reductions. 

The main point of the study’s contention is the overstated baseline emissions used in calculating the projects’ net climate impact. And that’s by a factor of 400%.

But of course, despite it being an academic investigation, it’s crucial to also note that the way the researchers take the “baselining” method doesn’t match Verra’s crediting program for REDD+ projects. 

Verra was quick to respond to such a big accusation…

The world’s largest carbon standard worked closely with the publication to explain why their findings are not true. Verra responded that the article is “incorrectly claiming that REDD+ projects are consistently and substantively over-issuing carbon credits.”

Verra also noted that the studies were using “synthetic controls” that don’t account for project-specific factors that cause deforestation. Thus, they largely miscalculated the impact of the projects that Verra certified.

Other key market players and stakeholders also responded. 

For instance, a carbon rating agency, Sylvera, fired back by citing their own research on the subject matter. Their findings showed that the publication’s claim on worthless credits didn’t consider the biggest factor in baseline setting – the proximity to the active front of deforestation.

The rater asserted that forests need protection to help achieve the world’s climate goals. They said that we “must not sabotage the financing of projects that are delivering sound climate, social, and biodiversity benefits”. 

Likewise, a climate tech startup Pachama that has been evaluating over 150+ deforestation projects commented. The company is using artificial intelligence (AI) in determining baseline scenarios of the projects they support. 

This brings us to the next section – the solutions to these major issues:

Inflated baselines,
Underreporting of deforestation, and 
Forest loss causing permanence risk

Addressing the Issues with Technologies and Innovations

At the onset of REDD+ projects, advanced technologies like AI, satellite data, remote sensing, and algorithms weren’t yet around. That means companies rely on manual tools and systems in establishing baseline scenarios.

But now that digital technologies and even AI are publicly available, improvements are being made in setting baselines.

For example, Pachama’s technology called “Dynamic Control Area Baseline” ensures that carbon credits accurately represent real emission reductions. They observe forest loss in the control area using remote sensing data and then compare it with what they’ve observed with the project reported. 

The following image shows the project area in white and the control area in blue. 

Carbon rating agencies that focus on nature-based projects like REDD+ are also using innovative technologies to provide more quality assurance. 

Another unpopular solution is the application of blockchain in monitoring, reporting, and verification (MRV) of forest projects. Blockchain-based MRV can help improve verifiability of REDD+ carbon credits and ensure their permanence. Yet, further research is necessary in this field. 

Additionally, the current trend in the REDD+ sector is transitioning initiatives from project-level to jurisdictional or “nested” approach. This approach follows the same concept of REDD+ but covers national forests. 

The case of the Amazon in Brazil is an example. This jurisdictional REDD+ has a single reference baseline for deforestation.  

Plus, this new approach has not been used to issue voluntary carbon credits. Rather, it generates a new asset in the carbon market – sovereign carbon credits. The only concern with this solution is enforcement by political leaders.

When it comes to financing, carbon credits help fund REDD+, be it on a project-level or jurisdictional basis. 

Everland’s Forest Plan, in particular, will help the development and long-term financing for 75 REDD+ projects in threatened forests. Here’s the plan’s outlook for REDD+ from 2022 to 2030.

Everland’s forest projects will cover around 23 million hectares. The Forest Plan’s aims may be ambitious but they’re a part of a bigger, collective effort to end deforestation. 

What Comes Next for REDD+? 

While no one can predict or calculate 100% accurate baseline scenarios, improvements in practices will bring better results. This will enhance the accuracy of calculating how much carbon credits are due for REDD+ projects. 

Advanced technologies and new innovations will enable the market to correct itself. 

Following the bad press coverage for REDD+ earlier this year, misconceptions about them and their associated carbon credits continue to bring the market down. 

But as what major industry experts pointed out, not all forestry projects are the same. Some may have poor quality but many others still deliver significant positive climate benefits and sustainable development goals. 

Ultimately, there’s no single silver bullet for ending deforestation but carbon markets do have a crucial role to play here. They direct major investments and support toward REDD+ projects and programs worldwide. With that, REDD+ remains a vital tool in fighting climate change. 

The post What is REDD+? Development, Issues, and Solutions appeared first on Carbon Credits.

Revolutionizing Dairy Sustainability: Reducing Methane Emissions by 80%

Resonant Technology Group recently announced that its patented product, SOP® Lagoon, can significantly reduce greenhouse gas emissions of the dairy industries – 80% for methane and 75% for carbon dioxide. 

US-based Resonant is an affiliate of SOP (Save Our Planet), an Italian tech company run by biologists, agronomists, chemists, engineers, animal nutritionists, and veterinarians. SOP’s proprietary technology is for application to crops, animals, soils and vineyards.

Resonant is developing innovative ways of applying SOP® Inside technology aimed at mitigating GHG emissions. The company enables adaptation of SOP products in agriculture, food industries, and their supply chains. 

A Breakthrough Solution to Cut Methane Emissions

Methane is a more powerful gas than CO2 in heating up the planet. It accounts for about 50% of the increase in global temperatures while remaining in the atmosphere in a shorter period. Thus, cutting methane emissions could be the fastest way to prevent temperatures from going up.

Dairy cows are the major source of emitting around 8% of global methane pollution. And about 80% of the total GHG emissions of milk production comes from the farm level.

This is where Resonant’s SOP® Lagoon offers an unrivaled solution in reducing methane emissions at the dairy farm level. 

SOP® Lagoon is a mineral 0.07 oz (2g)/head additive that is applied once a week into the lagoon. Lagoon dairy waste emissions account for up to 57% of total dairy methane emissions. 

The SOP proprietary product can be used alongside other products that are scientifically proven to reduce enteric and soil emissions. It has been used by farmers for animals, crops, soils and vineyards in Europe and North America. 

A joint study from the University of Milan and University of California Davis scientifically showed that the SOP® Lagoon product’s application in dairy lagoons significantly reduced GHG emissions, targeting these pollutants:

Methane – 80% emission reductions
Carbon dioxide – 75% emission reductions

The researchers did a three-and-a-half month in-field study at a 520-head commercial dairy farm in Northern Italy. Their findings show the additive’s GHG reduction potential identified above. 

Other Ways to Lower Dairy Methane Emissions

The additive is also capable of reducing emissions from other sources, enteric (digestive) and soil. Overall reduction potential is more than 50% of total emissions from dairy farming operations. 

Other 4 separate studies have also confirmed SOP® Lagoon’s ability to offer an immediate and meaningful solution in cutting the methane emissions of the dairy and livestock industries in general.  

Other initiatives to reduce livestock emissions include improving reproductive efficiency in dairy cattle, which can cut methane emissions by 24%.

Another solution is to lower emissions from enteric fermentation by changing the livestock’s diet such as including seaweed or barley. Also, scraping manure and transporting it to another storage facility for cattle production systems may cut methane emissions by 55%.

Enteric and manure emissions make up as much as 40% of the total GHG emissions from dairy operations. The other 60% comes from effluents and manure flowing from dairy lagoons or barns.

Addressing those sources on a large-scale basis can potentially reduce methane emissions in millions of tonnes of CO2 equivalent (CO2e). And each tonne of emission reduction generates one carbon credit. 

Earning Extra by Cutting Methane

Carbon credits, also known as carbon offsets in voluntary markets, provide extra income for entities that reduce GHG emissions. 

While most credits are issued for activities reducing CO2 emissions, methane reduction through manure management such as applying the additive is also eligible to earn credits. The world’s largest certifier of carbon credits, Verra, had issued credits for cow methane reduction

And considering that methane can be 85x more potent than CO2, reducing more of it means more carbon credits generation. 

But the price for each carbon credit for methane reduction varies widely. Several factors affect the price, including location, market dynamics, and the certification standard. 

On average, the price for a carbon credit ranges from less than $1/tonne of CO2e to $15/tonne or more. Assuming that a 500-head dairy farm applies Resonant’s SOP® Lagoon and reduces about 2,000 tons of CO2e yearly (methane emissions), the owner can earn up to $30,000 a year. 

The additive can also reduce ammonia, which is being considered to be added to the target list of GHG emissions. 

The post Revolutionizing Dairy Sustainability: Reducing Methane Emissions by 80% appeared first on Carbon Credits.

The Flight to Quality in the Carbon Markets

Carbon offset credits trading on the voluntary markets have taken quite a hit in the past year, with their prices falling down.

Prices for the various CBL carbon offset futures contracts, such as GEO (based on the aviation industry’s standards) and NGEO (for nature-based offsets) have seen significant declines in the last twelve months:

There’s a couple of factors at play here, not least of which would be the tough global macroeconomic conditions we’ve had lately.

High rates of inflation not seen in decades, on top of the continued war in Ukraine and lingering pandemic effects all contributed to slower economic growth exiting 2022 and entering 2023.

In addition, progress on a unifying standard for the carbon credit markets on a global scale remained stagnant at COP27. This further hampers development of the voluntary markets.

However, there’s one more issue causing downward pressure on carbon offset credit prices that I want to focus on today. But unlike the other causes mentioned previously, this issue originates from entirely within the voluntary carbon markets.

When One Man’s Trash is Another Man’s Trash

Last month, the CEO of the world’s largest carbon credit certification company, Verra, stepped down.

Now it’s not always bad news when a company’s top dog steps down. Sometimes they leave to pursue new opportunities, or to retire… but unfortunately, this wasn’t the case with Verra.

Verra’s CEO David Antonioli decided to walk away from his job following a string of bad press covering Verra’s poor environmental standards:

Over the past several months, the integrity of Verra’s carbon credit verification standards came under fire. That’s courtesy of independent investigations by news agencies, corporate watchdogs and other third-party organizations.

The accusations were severe, with many accusing Verra of certifying “junk” carbon offsets.

What makes a carbon offset credit junk? Well, there’s a couple different possibilities.

One major reason carbon offsets would be worthless is if they don’t achieve the environmental benefits they claim to have. A carbon project might be over-exaggerating its greenhouse gas reductions or underreporting its risks. Some carbon offsets are also based on emerging technologies that may not be fully proven yet.

Additionality is also a term often used here that you may have heard of before. In essence, additionality refers to whether a carbon project would have happened anyway even without taking carbon credits into account.

You’ll see this term come up often on renewable energy offset projects as certain types of renewable energy projects are already profitable and thus, have been undertaken regardless of the impact of carbon credits.

Finally, in the worst-case scenario, a carbon offset project might even actively cause harm to the area it’s based in as well as the communities there. This is more likely to happen when the project is based in a developing country. Standards are often more difficult to enforce in these areas.

As a result of these claims, purchasers of Verra credits came under fire by association as well. Companies like Chevron, Disney, Credit Suisse and Gucci were accused of relying on low-quality carbon offsets to achieve their net zero goals.

A Matter of Quality Over Quantity

Now if the voluntary carbon markets were robust and Verra was just another company, this wouldn’t be a big deal.

The problem, however, is that Verra isn’t just another carbon credit company. It’s the carbon credit company.

Right now, Verra certifies 75% of all carbon offset credits in the market. They issued their billionth credit just last year.

Verra scrambles to win back trust and is revising and updating its carbon credit methodologies, particularly for its rainforest program. But the damage has already been done.

Companies are now instead choosing to look elsewhere for higher-quality carbon credits, even if they might be more expensive:

Last month, JP Morgan announced that it would be committing more than $200 million towards a number of carbon removal technologies totaling 800,000 tonnes of carbon to be removed from the atmosphere and sequestered – a cost of $250/tonne.
Tech giant Microsoft also announced in May that they would be purchasing 2.76 million credits over 11 years from Danish energy company Ørsted for capturing and storing carbon emissions from their biomass power plant – a BECCS-type carbon project.
In April, Apple launched a major expansion of their Restore Fund, adding another $200 million to their portfolio of high-quality nature-based carbon offset projects.

With this kind of money being thrown around, it’s clear that even if Verra’s credits are off the table, carbon offsets as a whole certainly aren’t. The major players are merely finding alternative sources for their needs.

Green-Lighting the Path Forward for Carbon

The market for carbon offsets doesn’t look great right now with their prices plummeting down. Yet, their usefulness as a tool in combating climate change and role they play in carbon neutrality planning is undeniable.

Despite the negative press surrounding the carbon offset industry in recent months, the companies with real, actionable net zero plans haven’t shied away. Rather, they’ve doubled down on their investments with sizeable commitments towards proven, high-quality carbon projects, as shown above.

Simply put, the voluntary markets continue to shake off the after-effects of the bad press from Verra and the tough economic conditions. Both companies and individual investors need to be more selective with the carbon projects they want to get involved in.

There’s a veritable forest of carbon projects and carbon companies out there – and only the best will emerge unscathed from this market downturn.

The big oil companies know carbon offsets are part of the solution. But this sector will continue to evolve. 

The post The Flight to Quality in the Carbon Markets appeared first on Carbon Credits.