Financing for lithium projects in the United States is facing challenges due to sustained low lithium prices, posing a threat to the development pipeline and potentially hindering President Joe Biden’s ambition to bolster the domestic battery supply chain.

According to the S&P Global Market Intelligence report, there are about 100 lithium mine projects planned across the US. However, the allure of these projects is waning amidst a steep decline in lithium prices. 

Navigating the Lithium Price Plunge

The sharp price decline has left many investors perplexed, particularly given the projected long-term demand for the mineral. Experts noted that it’s largely attributable to the slowdown in electric vehicle sales growth in China. This is also further compounded by the overall economic slowdown in the Chinese economy.

Market Intelligence data reveals an 81.7% drop in lithium prices from their 2022 peaks. This downturn made many projects less attractive to investors as the prolonged low prices persisted.

Existing US lithium producers, particularly those using brine extraction methods rather than hard rock resources, have managed to weather the price downturn to some extent. 

Current producers have learned to adapt to the changing market conditions. Some employed cost-cutting measures, like what Albemarle did, while others are scaling back on their expansion plans.

READ MORE: Lithium Producers Adapt to Price Plummet, Cut Costs, and Delay Investments

However, the impact of the market downturn has been felt more keenly within the pipeline of future lithium output projects.

Additionally, junior companies seeking to develop lithium projects in the US and elsewhere have encountered difficulties securing funding amidst bearish market sentiment due to the price decline.

The financing hurdles confronting US lithium projects underscore the delicate balance between market dynamics and the imperative to strengthen domestic supply chains for critical battery materials. 

Per Market Intelligence data, the price of lithium carbonate ex-works China battery stood at $14,750 per metric ton on March 6, down from its 2022 peak of $79,650/t on Nov. 30. Despite remaining 151.7% higher than the 2020 low of $5,850/t on July 31, current prices are not attractive for launching new projects.

Industry Insights and Uncertainties

The impact of low commodity prices on US lithium projects is significant in project development, particularly among smaller operators. These companies are finding it increasingly difficult to access funding due to concerns over returns.

Still, a junior Canadian lithium company, Li-FT Power (LIFT: LIFFF), remains committed to advancing the exploration and development of high-quality lithium assets in the country. It consolidates and advances hard rock lithium pegmatite projects in known lithium districts in Canada. 

Keith Phillips, the CEO of Piedmont Lithium based in North Carolina, shared insights on lithium mining, describing it as a cyclical industry prone to fluctuations. In an interview, Phillips remarked on the significant downturn in lithium prices, saying:

“With lithium prices down by 90% from a peak 16 months ago, just about every new development project is slowing down, which will lead to another supply crunch.”

The uncertainty surrounding demand poses a significant challenge for the lithium industry. While increased demand for reliable lithium, spurred by the US Inflation Reduction Act, could provide some relief to the industry, there are concerns about the limited progress in the project development due to low prices. 

This issue could potentially undermine the Biden administration’s objectives of reshoring critical supply chains. The IRA’s incentives should be able to adequately address this with proper incentives to promote domestic mining. 

The Role of IRA and Investments

The law’s incentives have attracted massive investment into the US battery supply chain, which was largely underdeveloped before the bill’s passage. Electric vehicles (EVs) that meet specific requirements related to final assembly, critical mineral sourcing, and battery material processing may qualify for a $7,500 tax credit under the IRA.

The rule has led to a notable increase in investments in domestic critical mineral projects by both miners and automakers. For instance, Piedmont Lithium Inc., a US-based lithium producer, was motivated to establish a lithium processing plant in Tennessee. Moreover, its lithium project in North Carolina is also expected to start this year. 

Ford Motor has planned to allocate $3.5 billion to construct a battery plant in Michigan, citing the IRA as a significant factor influencing this decision. Ford has also entered into supply agreements with several lithium companies in countries with free trade agreements with the US. 

This strategic move enables the automaker to incorporate materials from these countries into its vehicle batteries while still qualifying for tax credits under the IRA. Similarly, Tesla Inc., the EV giant, has established supply agreements with multiple miners, including Piedmont and Albemarle. 

Below is the investments to EV supply chain since the IRA has been enacted.

While there’s a strong demand for IRA-compliant material, the supply remains insufficient, according to Benchmark’s Williams. Albemarle CEO Kent Masters echoed this sentiment by expressing doubts about the effectiveness of the IRA in stimulating necessary investments. 

Masters emphasized that the law has not yet succeeded in bridging the pricing gap between China and North America. It means that further measures may be necessary to incentivize investment in domestic lithium production.

READ MORE: Why Lithium Prices are Plunging and What to Expect

Challenges in the US lithium project pipeline amid price declines highlight the balance between market forces and policy incentives. Despite efforts like the Inflation Reduction Act, uncertainties linger. Addressing these challenges is vital for US competitiveness in the global energy transition.

The post Issues Facing US Lithium Projects and Battery Supply Chain Plans Amidst Price Decline appeared first on Carbon Credits.

A recent analysis from the International Energy Agency (IEA) indicates that the growth in global carbon emissions hit record high in 2023 but it moderated compared to the previous year. This is primarily due to the ongoing expansion of renewable energy sources such as solar, wind, and nuclear power.

According to the IEA report, global emissions experienced a modest increase of about 1.1% in 2023, totalling approximately 410 million tons. Ninety percent of these emissions are caused by human activities, now reaching a total of 37.4 billion tonnes. 

However, the report highlights that without the deployment of clean energy technologies, emissions would have surged significantly more over the past 5 years. 

From 2019 to 2023, the deployment of solar photovoltaic (PV), wind power, nuclear power, electric cars, and heat pumps has collectively avoided approximately 2.2 billion tons (Gt) of emissions annually. Without these technologies, the global increase in CO2 emissions over the same period would have been more than 3x higher.

Additionally, droughts hindered the operation of hydropower plants at full capacity, leading to a reliance on fossil fuels to meet energy demands. This is responsible for almost 40% of the overall increase in emissions, as illustrated below.

How Clean Energy Curbs Emissions Growth

Despite the ongoing increase in emissions, advanced economies achieved a notable milestone by reducing carbon emissions while experiencing GDP growth. This divergence signals a significant departure from the historical trend linking fossil fuel energy development with economic expansion. 

Moreover, last year marked the first time that over 50% of the electricity generated in advanced economies came from low emissions sources. These remarkable achievements in emissions reduction were largely due to a combination of factors:

Extensive deployment of renewables, 
The transition from coal to natural gas, 
Improvements in energy efficiency, and 
Advancements in lower-emissions industrial production processes.

Fatih Birol, the executive director of the IEA, emphasized the resilience of the clean energy transition despite facing various challenges. Birol noted that: 

“The clean energy transition has undergone a series of stress tests in the last five years — and it has demonstrated its resilience… continuing apace and reining in emissions — even with global energy demand growing more strongly in 2023 than in 2022.” 

In the United States, total CO2 emissions stemming from energy combustion experienced a notable decline of 4.1%, equivalent to a reduction of 190 million tonnes (Mt), even as the economy expanded by 2.5%. Notably, the electricity sector accounted for two-thirds of this emissions reduction, indicating significant progress in decarbonizing the power generation sector.

RELATED: Transforming the American Clean Energy Landscape Under Biden’s Era

Meanwhile, total CO2 emissions from energy combustion in the EU dropped by almost 9% in 2023 (-220 Mt). Electricity generation from coal decreased by 27% in 2023, while natural gas-based power generation fell by 15%.

Clean Energy Disparities in Developing Economies 

Despite the progress, there remains a stark imbalance in clean energy development, with advanced economies and China dominating the landscape.

According to the report, in 2023, these leading economies accounted for a staggering 90% of new solar photovoltaic (PV) and wind power installations worldwide, along with 95% of electric vehicle (EV) sales. This concentration underscores the need for broader global investment in clean energy, especially in developing and emerging economies.

There exists a significant investment gap, with the UN estimating an annual requirement of about $1.7 trillion in renewables investment for developing countries. Despite this pressing need, the investment inflow into clean energy projects in developing countries falls short. 

In 2022, these nations received only $544 billion in clean energy investment, as per UN data. Addressing this gap and bolstering investment in clean energy infrastructure is paramount to achieving global emission reduction targets.

The Driving Force Behind Emissions Surge

Since the post-pandemic era, coal has emerged as the primary contributor to the surge in global CO2 emissions. Energy combustion emissions have witnessed a notable increase of around 850 million tonnes (Mt) since 2019, with coal emissions alone growing by 900 Mt. 

Meanwhile, gas emissions have experienced a moderate rise, while oil emissions remain slightly below their 2019 levels.

Notably, coal has accounted for around 70% of the upsurge in global carbon emissions from energy combustion in 2023. It contributes to around 270 Mt to the overall emission increase.

This trend is particularly pronounced in China and India, where substantial increases in coal combustion emissions were observed, only partially offset by declines in advanced economies.

On the other hand, oil emissions saw an uptick due to the reopening of economic activities in China and the resumption of global aviation, resulting in a global increase of about 95 Mt. In contrast, natural gas emissions witnessed only marginal growth at the global level, indicating a relatively stable trajectory.

Shifting Landscapes: Global Trends in Emissions Contribution

The global emissions landscape is undergoing significant shifts, with notable changes in the contributions of different countries and regions. China, for instance, has emerged as a dominant player, surpassing the combined emissions of advanced economies in 2020 and experiencing a further 15% increase in emissions by 2023. 

India, on the other hand, has overtaken the European Union to become the third-largest emitter globally.

Developing Asia now accounts for approximately half of the world’s emissions, marking a substantial increase from previous years. China alone contributes a significant share, responsible for 35% of global CO2 emissions. Interestingly, China’s per capita emissions exceeded those of the advanced economies collectively in 2020 and have continued to rise, now standing 15% higher. 

The IEA findings underscore the resilience of the clean energy transition amid growing carbon emissions but challenges persist, particularly in developing economies. Addressing the gap and bolstering global investment in clean energy infrastructure is critical to meeting emission reduction targets and combating climate change.

The post IEA Reveals Global CO2 Emissions Reach Record High in 2023, But Growth Slows appeared first on Carbon Credits.

As a major player in the global economy, India stands as an integral point of economic development and environmental responsibility. However, India is also the world’s third-largest emitter of CO2, after China and the US.

Studies show emissions could rise to 50% by the year 2030 in India. To counter this effect, a carbon tax has been implemented primarily aimed at reducing emissions and curbing the use of fossil fuels like coal, gas, oil, etc.

India’s proactive engagement in the G20, a response to the challenges posed by carbon emissions, and its collaboration with the EU underscore its commitment to global climate action. However, the overall picture is slightly different that what it seems at the outset.

In a recent development, the EU has decided to impose a carbon tax known as the Carbon Border Adjustment Mechanism (CBAM), effective from January 1, 2026, on the import of 7 carbon-intensive sectors including:

Steel products
Iron and iron ore concentrates
Cement
Aluminum products
Fertiliser
Hydrogen
Electrical energy

The CBAM roll out is planned in 4 phases as show in the following figure:

Source: indiabriefing.com

The tariff is as high as 20-35% on imports of these high-carbon goods. And now, India along with other Asian nations, have not taken this decision favourably. Rather, the bloc has strongly objected to the EU’s new, unfair tax policy.

Impact of EU’s Carbon Border Tax (CBT) on India 

Many government officials in India have considered the proposed CBAM as “discriminatory” and a “trade barrier” that would hit not only Indian exports but also those of many other developing nations. The World Trade Organization (WTO) has also raised concerns about the fairness of the EU’s taxation policy when India is already adherent to the Paris climate agreement protocols of becoming carbon neutral by 2070.

In 2022, 27% of India’s exports of iron, steel, and aluminum products worth USD$8.2 billion went to the EU. With this high tax value, the EU’s income is expected to surge by leaps and bounds while disrupting earnings for major Indian conglomerates like Tata Steel, Steel Authority of India, JSW Steel Group and Essar Steel India Limited.

In order to fully grasp the new CBAM tax implications, one only need to examine India’s exports to the EU in a single year (2022) as shown in the chart below.

Source: indiabriefing.com

India’s carbon tax rate is currently among the lowest in the world at just USD$1.6 per tonne of CO2 emissions. But The EU’s CBAM is poised to cripple India’s exports of energy-intensive items, including key trade items like steel, aluminum, cement, and fertilizers. The Indian export market is most likely to encounter increased production costs with a drop in demand and competition for their products within the European economy.

[PRESS RELEASE: India’s Green Actions – From Carbon Subsidy to Carbon Tax]

Among all these sectors, the steel industry is the toughest to decarbonize and has the highest carbon intensity, responsible for ~ 8% of global emissions.

It could be stated that the impact of the EU’s CBT on India will depend on the carbon intensity of exported products and their substitutes in the EU market. Products with high carbon intensity will face increased charges and low competition. However, if low-carbon alternatives for Indian products are unavailable in the EU market, the outcome of CBAM on Indian exports might be constrained.

Mr. Piyush Goyal, Commerce and Industry Minister of India has retaliated with his stern statement:

“India will address the problem of CBAM with confidence, and we will find solutions. We will see how we can convert CBAM to our advantage if it comes in. Of course, I will retaliate.”

The Indian government is seeking to file a complaint to the WTO against the EU’s tax policy to protect its domestic exporters and MSMEs. But the war of words doesn’t end there, with EU’s trade chief Valdis Dombrovskis stating:

“The European Commission had designed CBAM carefully so that it was compatible with WTO rules, applying the same carbon price on imported goods as on domestic EU producers”.

Yet, an amicable resolution of the conflict is still ongoing. India and the EU are in talks and are looking for solutions to minimize the impact of CBAM on the Indian carbon market.

READ MORE: Why India’s Path to Net-Zero is Different From Other Super-Emitters

India to Take Proactive Steps to Mitigate EU’s CBAM Fallout

While further developments are expected as this sage continues, the Indian government is already exploring various steps to tackle the potential consequences of the EU’s CBAM.

Developing a robust domestic carbon pricing system to incentivize emission reduction by companies and harmonize with the EU’s carbon goals. Encourage Indian businesses to analyze customs data, purchase and cost records, carbon footprints, transactional models, logistic flows, and overall global value chain. Evaluate the potential effect of CBAM on their operations and call for strategic changes to make Indian businesses more competitive.
Encouraging investment in renewable energy sources like solar and wind power, green hydrogen, and resilient agriculture to diminish carbon emissions. Most importantly, Mr. Piyush Goyal has also asked the automobile industry to boost electric vehicle (EVs) production to promote sustainable growth.
Ramping up domestic capacity and boost investment in carbon capture and storage technologies and mitigate the carbon footprint of heavy industries.

And while the EU’s carbon tax could be challenging for Indian industries, it might also spark a positive change in the Indian carbon market.

As we have seen, the Indian economy is highly resilient and can embrace the “challenge” as an opportunity for a smoother, green energy transition. The leaders of both parties are looking ahead to address the CBAM crisis diplomatically and fulfill their commitment to the Paris Agreement.

FURTHER READING: India Revises Its Carbon Credit Trading Scheme for Voluntary Players

The post India Challenges EU’s Carbon Border Adjustment Mechanism (CBAM) appeared first on Carbon Credits.

The Securities and Exchange Commission (SEC) approved a new rule mandating publicly traded companies to disclose their direct greenhouse gas emissions. The proposal received backing with 3 votes to 2 at a recent SEC meeting. 

The newly passed legislation titled “The Enhancement and Standardization of Climate-Related Disclosures for Investors” also requires US-based companies to disclose details on their use of carbon offsets, including the associated costs if the credits contribute to their emissions reduction targets. They also need to describe how climate change impacts their operations, financial condition, and strategies. 

Moreover, companies must explain the risks and how they’re managing them, such as the impact on revenue and expenses. 

RELEVANT: A Deep Dive into SEC’s Proposed Climate Disclosure Rule for Sustainability

What Emission Scopes Are Mandated?

The original SEC proposal initially required companies to disclose their Scope 1, 2, and 3 emissions. But Scope 3, which garnered controversy, was ultimately excluded in the final rule. 

Scope 1 refers to emissions directly emitted by the company while Scope 2 covers emissions from the fuel and energy purchased by the company. Whereas Scope 3 pertains to emissions generated by customers and suppliers. 

Scope 1 and 2 emissions are mandatory to report on, provided the company considers the information “material” to investors. Having this vital climate-related information will give investors insights to come up with informed decision-making. 

Scope 3 emissions were the subject of significant controversy due to the challenges associated with calculating indirect emissions, which impose the highest compliance costs on companies. Big companies, particularly those in the fossil energy sector, opposed this reporting requirement.

Thus, following an extensive public comment period, which garnered 4,500 letters and 24,000 comments, the requirement to disclose Scope 3 emissions was ultimately dropped.

For the past 2 years, the SEC has been deliberating on formulating standardized requirements for corporate climate disclosure. The goal is to establish a minimum standard for transparency in boardrooms. 

Now, the increased transparency required on the use of offsets would influence future purchases of carbon credits.

According to the final rule, companies will now be obligated to provide a detailed breakdown of the costs associated with carbon credits. Specifically, the approved proposal mandated that:

“The capitalized costs, expenditures expensed, and losses related to carbon offsets and renewable energy credits or certificates (RECs) if used as a material component of a registrant’s plans to achieve its disclosed climate-related targets or goals, disclosed in a note to the financial statements…”

This disclosure requirement is one of 3 main categories of information mandated in the amendments to the SEC’s final rule. 

Unpacking SEC New Rule’s Key Provisions

While it’s essential for every company to thoroughly understand the SEC’s official rule, spanning almost 900 pages, 3 key provisions stand out:

“Accelerated filers,” which are companies with publicly traded shares valued at $75 million or more, are mandated to disclose Scope 1 and 2 emissions.
Costs stemming from severe weather events and other natural disasters must be disclosed on financial statements.
Companies are obligated to disclose both the actual and potential material impacts of climate-related risks on their strategy, business model, and outlook.

The SEC made a significant revision to its earlier draft by removing a requirement to disclose expenditures related to “general energy transition activities” in financial statements. 

Instead, the final rule focuses specifically on disclosing expenditures related to carbon offsets and RECs, as confirmed by SEC officials.

Go over to SEC’s fact sheet that summarizes the specific rules that a registrant has to disclose.

The Commission estimates that around 2,800 companies have to prepare to report on their climate-related financial risks. That’s 40% of the 7,000 US public companies registered with the SEC.

Meanwhile, about 60% of the 900 SEC-registered foreign private issuers may also be subject to the new rule.

Accelerated filers, in particular, need to start disclosing their Scope 1 and Scope 2 emissions in 2026. Below are the compliance dates companies have to keep in mind based on their filer status:

LAF=Large Accelerated Filers, Non-Accelerated Filer (NAF), Smaller Reporting Company (SRC), or Emerging Growth Company (EGC).

Mixed Reactions: The Impact of SEC’s Climate Disclosure Rule

The new climate disclosure rule received both praise and criticism. Former SEC commissioner Allison Herren Lee commented that:

“The new rule, unfortunately, does little to prevent companies from making vague, untested and, most significantly, unsubstantiated, statements about their carbon footprints.”

On the other hand, supporters of the new rule noted that it’s a great milestone. For Lane Jost, head of ESG advisory at Edelman Smithfield, 

“There is ample room to argue the validity of this rule on all sides, but regardless, this is a historic day for enhancing common, comparable, and credible disclosure rules on climate risks for investors and issuers.”

The SEC rule marks a significant addition to the expanding global regulatory landscape for corporate climate disclosures. International companies gear up to comply with Europe’s Corporate Sustainability Reporting Directive, which mandates climate disclosures. And with California’s carbon emissions disclosure requirements introduced last year, the SEC’s rule further underscores the increasing importance of climate-related transparency in corporate reporting.

READ MORE: California Sets Precedent with New Corporate Climate Disclosure Laws

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