Amazon’s Carbon Emissions Take a Green Turn with Renewables

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Since Amazon started disclosing its carbon emissions in 2019, the retail giant saw its footprint decline for the first time as it works towards its 2040 net zero emissions goal. 

The world’s largest online retailer reported in August last year that its emissions were up 40% from 2019. In the company’s latest Sustainability Report, they showed that they managed to cut emissions by 0.4% from the previous year to 71.27 million metric tons of carbon dioxide. 

Amazon’s carbon intensity, emissions per dollar of sales, also dropped 7% and has decreased 24% since 2019. The retailer also reported the progress of its The Climate Pledge program, while focusing on renewable energy projects and deployment. 

Working Its Way to Net Zero by 2040

After seeing increasing carbon emissions four years ago, Amazon had seen a slight decline in its footprint in 2022. The 0.4% decrease is achieved despite the company’s year-over-year net sales growing by 9%. The same goes for its carbon intensity.

Amazon said these positive climate achievements are largely due to improving efficiency across its business and growing investments in renewables.

Through Scope 1 emissions (direct operations) rise by 11%, Scope 2 emissions (purchased electricity) drop by 29%. The company focuses on decarbonizing delivery and logistics by launching the first electric heavy goods vehicles in the UK and Germany. 

The company is electrifying its delivery fleet, as evidenced by buying 100,000 Rivian electric delivery vans that will hit roads in 2030. They now have over 9,000 EVs in its global fleet, and 2,600 Rivian vans in North America.

Apart from using more EVs, the e-commerce giant is also relying on green hydrogen to power its forklifts in fulfillment centers in North America.

As the largest source of its carbon footprint (77%), Amazon saw a 0.7% decrease in the value chain or Scope 3 emissions.

Nevertheless, though the company doesn’t have direct control over its Scope 3 sources, it’s working closely with suppliers to encourage them to decarbonize their own businesses, too.

Amazon is helping them by providing products and tools they need to track emissions and reduce them. Through its Supply Chain Standards, the retailer requires suppliers to share their carbon data, particularly their own carbon reduction goals. 

Investing in Renewable Energy to Boost Sustainability 

Shifting to renewable energy is one of the significant ways to cut emissions, according to Amazon’s Sustainability Report. Investing in renewables enables the company to achieve a 29% reduction in emissions from purchased power or Scope 2. 

Early this year, the retail giant announced 401 renewable energy projects which represented over 20 GW of clean energy capacity. That’s enough to power the equivalent of 5.3 million U.S. homes each year. Part of that is the projects it signed with the Indian authorities in January, allowing it to trade renewable energy in the country. 

In 2022, 90% of electricity consumed by Amazon was from renewable energy sources like solar and wind, up from 85% in 2021. The retailer further claimed in the report that they are on a path to reach 100% renewable by 2025.

Amazon has spent millions on renewable energy projects to power some of its warehouses, data centers, and offices. This makes the e-commerce leader the largest corporate buyer of renewable energy for the 3rd year in a row.

Asserting the big role of renewable energy in reaching net zero, Kara Hurst, Head of Worldwide Sustainability at Amazon said:

“We are investing in renewable energy around the world, with our teams analyzing routes and distances to build a logistics system that gets packages to customers faster, with fewer emissions.” 

The key to making renewable energy more meaningful is to pair it with energy storage. In line with this, through The Climate Pledge, Amazon has invested in companies that produce green hydrogen, a type of renewable energy that can be stored for future use.

To sum up all the major points leading up to its 2040 net zero goal, Amazon has the following roadmap:

Source: Amazon 2022 Sustainability Report

The Climate Pledge to Accelerate Sustainability Efforts

Amazon and Global Optimism co-founded the $2 billion Climate Pledge Fund in 2019. Their goal is to bring together the world’s top companies to ramp up climate actions. 

It inspires other companies to make their own ambitious climate goals and strive to achieve them.

The venture investment program supports sustainable technologies and services that will help Amazon achieve net zero emissions by 2040. New investments in 2022 bring the Fund’s portfolio to 20 total companies. 

Parties to the pledge agree to regularly measure and report on their carbon emissions. They then commit to reducing emissions by implementing various decarbonization measures. And any remaining footprint can be offset with permanent, real, additional, and verifiable carbon credits. 

The initiative’s progress in 2022 includes 111 additional signatories and the following results:

Amazon’s 0.4% carbon reduction amid growth marks progress towards its net zero goal by 2040.

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Base Carbon Reports Over $100M in Net Income

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Base Carbon Inc.(BCBN), a leading Canadian financier in global voluntary carbon markets, has unveiled its Q2 2023 financial results. The announcement led to a +30% bump in the company’s share price, driven by a remarkable net income of $104.1 million.

The results mark a key transition for Base Carbon. The company has moved from a development stage to generating free cash flow.

Base Carbon generates revenue by providing upfront capital to carbon projects.

Here’s a detailed look at their two major projects and financial highlights.

Vietnam Household Devices Project

In 2022, Base Carbon committed to funding the production and distribution of 850,000 fuel-efficient cookstoves and 364,000 water purifiers for rural families in Vietnam. As of June 30, 2023, payments of $18.9 million were made, covering 91% of the Vietnam Project’s capital.

The project’s first Verified Carbon Units (VCUs) were issued in Q2 2023. More issuances are planned every six months for the next 10 years.

Rwanda Cookstoves Project

In January 2022, Base Carbon inked an agreement to distribute 250,000 cookstoves in Rwanda. The project is now fully funded, with payments totaling $8.825 million.

The cookstoves have been delivered, and the first carbon credits are expected in late 2023.

Base Carbon’s CEO, Michael Costa, expressed excitement about Base’s progress:

“Monetizing the Vietnam Project’s first carbon credits is pivotal. We’ve transitioned to generating free cash flow. We’ll focus on redeploying cashflows into our project pipeline. Several announcements are coming soon.”

Second-Quarter 2023 Financial Highlights

Cash and Equivalents: Base Carbon ended the quarter with $9.96 million in cash and cash equivalents, a $1.4 million increase compared to Q1 2023.
Vietnam Project: The first tranches of 1,116,221 Verified Carbon Units (VCUs) were issued and delivered, leading to a full contractual settlement of $6.4 million. The realized net gain was $1.95 million.
Net Income: The company reported a second-quarter net income of $104.1 million, representing $0.85 in earnings per share.
Share Purchase: Base Carbon purchased 3,046,700 common shares for cancellation and may purchase up to an additional 7,974,471 common shares during the next 12 months.
Vietnam Project Completion: The Vietnam Project capital deployment is now 91% complete, with remaining capital expenditures anticipated to be fully deployed by year-end 2024.

The full New Release can be found here.

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Newlight Closes $125M for Turning Carbon into Fashion Bags and More

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California-based Newlight, which brings a new biological pathway to making plastics, closed a $125 million equity round led by GenZero. 

Newlight aims to help mitigate climate change by turning greenhouse gas into a resource. By mimicking nature’s way, Newlight uses microbes to turn captured carbon, air, and methane into degradable, high-performance biomaterials called AirCarbon®. 

AirCarbon is a biomaterial used to decarbonize heavy plastic-consuming industries such as foodware and fashion. 

GenZero led the funding round, with participation from Oxy Low Carbon Ventures (OLCV), a subsidiary of Occidental (Oxy), and Charter Next Generation (CNG).

GenZero is an investment platform company owned by Temasek seeking to ramp up global decarbonization efforts and deliver positive and scalable climate solutions.

Expressing their gratitude for achieving this great milestone, Newlight CEO Mark Herrema noted that:

“This capital round represents an inflection point for Newlight, where we have the opportunity to build on 20 years of research, development, and commercialization, and expand biological decarbonization at large scale.”

Harnessing The Power of Nature 

Alongside global warming, the world is also dealing with the growing piles of plastic waste, with hundreds of million tons produced yearly. Each of these environmental issues needs specific solutions to address. But with Newlight’s technology, both problems can be resolved at once.

There are three ways to turn CO2 into plastics: electrochemistry, thermocatalysis, and biological. Newlight is harnessing the last pathway or nature’s way to biologically convert greenhouse gas into polymers using microbes found in the oceans.

These microorganisms eat greenhouse gas to grow a molecule inside their cells called PHB (polyhydroxybutyrate). This molecule is found in most life on Earth and is used by living organisms like leaves as a biological energy and carbon storage vehicle. 

PHB is meltable and moldable once purified, making it ideal for delivering various material functions. AirCarbon leverages all the natural and high-performing qualities of PHB.

By weight, AirCarbon is about 40% oxygen and 60% carbon.

Synthetic plastic is hard to deal with as it doesn’t go away since it doesn’t occur naturally in the environment. AirCarbon is different; because it’s natural, nature knows how to deal with it. 

Source: Newlight website

When made using renewable energy, the process of producing AirCarbon is carbon-negative. That means it captures or destroys more carbon dioxide or its equivalent than it emits.

AirCarbon footprint: -87.76 kg CO2e/kg as certified by Carbon Trust.

After decades of research, Newlight made advances in technology design, purification, and material performance in their pilot plant Eagle 3. It’s the world’s first commercial-scale operation harnessing the power of nature to suck in carbon and make it into a resource. 

This enables the company to melt AirCarbon and use it to make everything from fiber and sheets to solid parts. The resulting products can replace things like synthetic plastic and animal leather.

Carbon Negative Materials for Net Zero

Today, Newlight delivers its AirCarbon-based materials to more than 5,000 locations worldwide. Their customers and partners include the food service, hotel, fashion, and automotive industries. Since foodware like straws and cutlery represents the majority of plastics polluting the oceans, Newlight focuses on making Restore foodware.

The other key application of AirCarbon is in fashion under their Covalent brand with the following sample products.

The $125M capital investment will enable Newlight to expand its AirCarbon production to create carbon-negative materials at a global scale. It will significantly scale up production at its existing California facility and a new facility under construction in Ohio. 

Apart from financial support, Newlight has also agreed with CNG to commercialize specialty films made from AirCarbon. It also inked a deal with OLCV to use the latter’s Direct Air Capture (DAC) systems for AirCarbon production plants. 

OLCV leads the construction of Stratos, the world’s largest DAC plant in Texas, while also developing sequestration hubs throughout the Gulf Coast region. The goal is to deliver large-scale and rapid carbon removal solutions to help tackle the climate crisis. 

DAC provides innovative opportunities to supply carbon as a raw material to make carbon-negative products. 

Both GenZero and OLCV find Newlight’s technology significant in meeting the demand for carbon-negative materials and accelerating the path to net zero emissions.

AirCarbon is now used to develop and make products for various industries, with the aim to turn everyday products into a consumer-driven effort to reduce carbon emissions. 

According to Herrema, their mission is to “provide companies with a measurable and scalable path to help them decarbonize their products and move closer to a net zero world”.

Newlight’s innovative approach to turning carbon into biomaterials is a significant milestone in tackling both climate change and plastic waste. The $125 million investment will enable Newlight to scale up its carbon-negative materials production globally.

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Embed Test

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Carbon Credits Live Prices

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Breaking Barriers: Giving Family Forest Landowners More Access to Carbon Markets

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In a groundbreaking collaboration, Finite Carbon and LandYield are revolutionizing the voluntary carbon market (VCM) by breaking barriers and opening new opportunities for family forest landowners to benefit from carbon credits.

Finite Carbon is a North American developer of forest carbon offsets and BP acquired a majority stake in Finite Carbon back in 2020 for an undisclosed amount. The company has developed over 3.9 million acres of high-quality forest carbon projects.

LandYield, a newly founded Tennessee startup, aims to give family forest owners access to carbon markets. Their goal is to give them the opportunity to earn by keeping their forests standing, enhancing carbon sequestration and forest value.  

Their collective expertise will simplify carbon revenue opportunities for non-industrial landowners, starting in 13 southeastern states in the U.S. Together they launched a new initiative called CORE Carbon platform for landowners to efficiently enroll into a carbon offset program.  

A Platform for Verified Forest Carbon Credits

Family or non-industrial forest landowners own about 275 million acres of forestlands. But fewer than 1% of them benefit from the carbon market. 

The new platform seeks to bring that percentage up by allowing landowners with 40 to 5,000 acres of forestland to earn extra income from carbon credits, otherwise called carbon offsets. Those who are eligible can start enrolling in the program. 

Here are the two key features of the program:

Flexibility: landowners may decide to enroll just a part of their land in the program. They can also continue doing commercial activities in the enrolled land like gathering non-timber products and leasing rights to hunters. 

Financial benefit: landowners will get quarterly compensation through carbon credits if they comply with the program’s reporting and monitoring requirements. The CORE Carbon platform manages and simplifies the process via its dashboard.

Leveraging Finite Carbon’s software and remote sensing expertise, the CORE Carbon platform features an advanced, easy-to-use digital mapping tool for landowners. It aids them to come up with a free carbon revenue proposal for their forestland while providing ongoing project management.

The program is also using satellite imagery and data from the U.S. Forest Service to keep track of forest growth. This information is crucial for measuring the exact amount of carbon emission reductions and removals resulting from improved forest management practices on enrolled forestland.

Accurate monitoring and reporting of carbon stocks is vital for generating verified and quantifiable carbon credits. 

The carbon offset projects are verified under the American Carbon Registry’s scientific methodology – Improved Forest Management on Small Non-Industrial Private Forestlands (SNIPFL) – specifically meant for family forests.

Supplying high-quality forest carbon offsets, falling under nature-based solutions, is even more critical today when criticism against them turns heavier.

The launch of the CORE Carbon platform comes at perfect timing. It can help address issues in producing quality forest offsets, which can bring the prices up again.

Breaking Barriers to Financial and Climate Benefits

To perform all the necessary tasks, Finite Carbon has delivered over $900 million in forest carbon deals. These collaborations involve forestland investment firms, nature conservation groups, and foresters. 

The company’s partnership with LandYield in launching the carbon program is yet another important milestone. Highlighting its significance, Finite Carbon CEO, Sean Carney, said:

“We’re excited to team up with LandYield to create long-term, mutually beneficial relationships with a broad range of landowners by providing a financial incentive for their environmental stewardship so people can enjoy their land for generations to come.”

LandYield delivers the payments to enrolled landowners who defer timber harvests and enhance their lands’ carbon sequestration abilities. 

By committing to make notable forest management changes, landowners contribute to long-term climate benefits. This 40-year commitment involves growing their forests for 20 years and keeping them standing for another 20 years. 

The platform enables LandYield to provide landowners with instant estimates of how much income they can potentially earn with carbon credits. 

LandYield benefits from the support of Mercuria Energy Group, one of the world’s largest independent energy and commodity groups, which plans to buy the offsets they generate. Mercuria intends to use the forest carbon credits to offset emissions of their fossil-fuel businesses. They will then sell the rest to other companies looking to cut their own carbon emissions.

The carbon program is initially open for landowners in the southeastern US, which boasts up to 120 million acres of family-owned forest land. The region includes Florida, Georgia, South Carolina, North Carolina, Virginia, Tennessee, Kentucky, Alabama, Mississippi, Arkansas, Louisiana, Texas, and Oklahoma. The program will cover other parts of the country as it expands. 

Last year, a similar program was launched by the American Forest Foundation – the Family Forest Carbon Program. The program seeks to help family forest landowners with as little as 30 acres gain access to the $2-billion carbon market.

By breaking barriers and offering financial incentives for environmental stewardship, Finite Carbon and LandYield have taken a significant step towards promoting nature-based solutions and sustainable forest management. Their initiative is a win-win solution for both landowners and the planet, fostering a greener future for generations to come.

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Nikola Wins $58M Total Grant for Hydrogen Stations; First Hydrogen Reveals Success of FCEV 630km Range

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Nikola Corporation, a global leader in battery-electric and hydrogen fuel-cell electric vehicles (FCEV), and energy solutions, secured an additional $16.3 million grant to help fund its hydrogen fueling stations. This new grant gives Nikola a total of $58.2 million to support its hydrogen infrastructure.

Last month, the California Transportation Commission (CTC) awarded Nikola, through its HYLA brand, a $41.9 million grant under the Trade Corridor Enhancement Program (TCEP) to build 6 heavy-duty hydrogen refueling stations across Southern California. 

Each hydrogen refueling station is designed to support and scale up the growth of heavy-duty commercial hydrogen refueling needs. 

Nikola also announced a milestone of 202 sales orders for its Class 8 hydrogen fuel cell electric trucks, reflecting a growing industry trend towards sustainable solutions.

In Canada, First Hydrogen announced that the road test results of its FCEV are even better than what’s expected. Feedback from the trial is promising, asserting the viability and sustainability of hydrogen energy. 

Is Hydrogen The Next Gold Rush? 

As the world is in dire need of reducing carbon emissions, innovations for alternative energy sources are ramping up. Hydrogen is one of those alternatives, particularly in providing a cleaner option for the transportation industry. 

Unlike fossil fuels that release planet-warming gasses, hydrogen fuel can be 100% clean, depending on the process used to burn it. In a hydrogen fuel cell EV, hydrogen is burned with pure oxygen in specially made cells. The only by-product is water.

Projections also indicate that hydrogen fuel will play a key role in the coming decades. Experts predict that the global hydrogen market will reach about $231 billion by 2030.

Regular EVs and FCEVs share many of the same advantages and disadvantages. Moreover, hydrogen-powered vehicles often have the same range as their traditional gas-powered counterparts.

A longer-range battery EV also requires a longer charging time. In contrast, refueling a hydrogen vehicle is the same as how a driver fills up his car at a gas station.

Some vehicle manufacturers are even betting on hydrogen by developing hydrogen fuel cell vehicles like Toyota recently revealed. But of course, hydrogen refueling infrastructure remains limited and lags behind EV battery charging infrastructure. 

Still, a few countries have made hydrogen energy a core of their clean energy transition.

And Nikola is taking the lead in making hydrogen refueling easier and more widely available through its HYLA stations.  

Nikola: The First-Mover of Hydrogen Stations

As a global manufacturer of zero-emission battery-electric and hydrogen-electric vehicles, energy solutions, and hydrogen stations, Nikola is revolutionizing the industry. 

The additional grant it recently received from CTC builds on Nikola’s partnership with Voltera to develop up to 50 HYLA hydrogen stations in North America over the next 5 years. 

The previous grant of almost $42 million was sponsored by the California Department of Transportation (Caltrans). Caltrans’ support of Nikola promotes its zero emission vehicle (ZEV) adoption of freight technology across the state. 

In appreciation of the massive support it’s getting from the state agencies, Nikola Energy president Carey Mendes said that:

“The California grant awards and government funding demonstrate the strong support for the Nikola hydrogen infrastructure brand HYLA’s mission of establishing a comprehensive zero-emission transportation solution to help fleets achieve climate goals…”

Mendes further said that they’re prioritizing developing a hydrogen ecosystem that advances their hydrogen fuel cell electric truck deployment.

These grants are a key enabler for Nikola’s first-mover zero-emission hydrogen fleet and its HYLA fueling stations. The company is also planning to develop an open network of commercial refueling infrastructure in California and eventually across North America.  

With the recent grant announcement, Nikola stock is up 459% from its recent lows as shown in the chart from TradingView.  

First Hydrogen: A Testament that FCEV Works

Back-to-back with Nikola’s announcement is First Hydrogen Corporation’s revelation that its hydrogen-fuel-cell-powered vehicle (FCEV) has achieved a range of 630 km on a single refueling during its fleet trial with UK-based SSE Plc.

First Hydrogen is a Vancouver and London-based company focusing on zero-emission vehicles, green hydrogen production, and supercritical CO2 extractor systems.

SSE, one of the UK’s largest energy infrastructure firms, is the first to road test First Hydrogen’s hydrogen-powered vehicles. 

Data from SSE trial shows that overall vehicle performance beat expectations by exceeding the results set in pre-trial commissioning tests. Results further suggest that heavier payloads and driving at higher speeds don’t significantly reduce the range or impact fuel cell performance. 

Highlighting these remarkable achievements of First Hydrogen’s FCEV vans in real-world conditions, SSE Head of Fleet Services, Simon Gray, says:

“SSE is focussed on enabling, harnessing and deploying new technologies and innovations which can accelerate the journey to net zero. The feedback from this trial will be invaluable when considering if hydrogen fuel cell electric vehicles could fit into our fleets of the future.”

These recent developments in the hydrogen market, particularly on FCEV and hydrogen refueling infrastructure seem to confirm that 2023 is indeed the year for green hydrogen. They’re also greenlighting the hydrogen revolution, which is considered a critical piece of the net zero puzzle. 

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ICVCM’s New Framework: Raising the Bar for Carbon Credits

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The Integrity Council for Voluntary Carbon Market (ICVCM) released the long-awaited framework that provides guidance on defining what makes carbon credits of high quality, which can help boost the credibility of the voluntary carbon market (VCM). 

ICVCM’s Assessment Framework is part of their Core Carbon Principles (CCPs) published last March. The framework will be used to assess if carbon credits adhere to its high-integrity CCPs. The CCPs include 10 codes categorized into three areas: governance; emissions impact and sustainable development.

CCP-labeled credits will be available to buyers by the end of the year. 

The Integrity Council believes that with their new framework, the VCMs now have a global standard for quality by addressing market issues on confidence and integrity. Executives of the ICVCM highlight the importance of high-quality credits in reducing emissions and delivering global climate goals.  

Carbon Prices Recovering From A Dip

The release of the guidance comes at a critical time for the $2 billion carbon market. The growing criticism over some carbon offset projects caused a sharp decline in market liquidity and carbon prices. 

Nature-based carbon credit prices (NGEO), in particular, are largely impacted.

But with various initiatives introduced, carbon credit prices started to recover slowly. As per S&P Global Commodity Insights’ Platts assessment, nature-based credit prices (Platts CNC) recovered from a record low of $1/mtCO2e in May to $2.45/mtCO2e in July. S&P Global data suggested that prices for the same credit reached an average of $9.55/mtCO2e last year. 

Many industry experts hope that this development will inspire more carbon removal and reduction efforts by bringing certainty to VCMs. But for a carbon credit to earn a CCP label, it has to go through two assessment levels. 

Program Level

This assessment framework and procedure were first released alongside the CCP guidelines. A dedicated “Assessment Platform” is part of this second release specifically designed for crediting programs applying for CCP eligibility. 

The ICVCM refers to these programs as a “standard setting program that registers mitigation activities and issues carbon credits”. Established programs are the Gold Standard, American Carbon Registry, and Verra’s Verified Carbon Standard (VCS).

Carbon Credit Category Level

This is the newly released assessment guidance but the framework doesn’t define yet what a ‘Category’ means. The Integrity Council will form a Categories Working Group (CWG) tasked to finalize the definition based on data gathered from rating agencies and publicly available information.  

The CWG will recommend which categories must be prioritized for approval, which ones need further assessment, and which carbon credits don’t deserve the CCP label. 

According to the framework, carbon credits must support carbon projects that align with net zero, additionality, permanent, and robustly quantified. 

The goal of the framework is to ensure that the highest quality carbon credits prevail and get premium prices. The assessment process is shown below.

Some carbon crediting programs and standards are revisiting and making some changes in their methodologies.

For instance, the world’s leading carbon registry, VCS, has been improving the quality of its forest carbon credits. The mostly used crediting program will finalize its REDD+ methodology by the last quarter of this year. 

Quality Issues Remain, Framework to Strengthen

While some improvements are happening in the market, some experts still warn that quality issues of projects continue to persist. 

Others say that these efforts from ICVCM and similar initiatives aren’t a “silver bullet” that can instantly resolve the issue of quality. Some say that the growing scrutiny of the VCM highlighted significant failures of the market to deliver at a project level. This has clearly impacted the supply of carbon credits as reported by S&P Global for different projects. 

Chart from S&P Global Commodity Insights

Still, as major initiatives focus on the quality of the credits circulating in the market, improvements will happen soon. The Integrity Council will start forming various multi-stakeholder working groups to make things clear and strengthen the framework.

The carbon market governance body will also keep on updating its guidelines and frameworks over time. That means incorporating new developments, technological advances, and lessons learned into the updated version of the framework. 

The release of this initiative comes after the VCMI launched its Claims Code of Practice just recently. It’s a separate guideline seeking to make the demand side of the VCM more credible. The Code will help guide companies in using carbon credits to voluntarily offset their emissions.

Both VCMI and ICVCM aim for the same thing: to bring integrity to the VCM. They’re also currently working to create an integrated market integrity framework aimed at improving carbon offset quality. 

The ICVCM will start announcing CCP-Eligible programs and CCP-Approved categories later this 2023, making CCP-labeled credits available for buyers before the year ends.

Will this new threshold for quality bring prices of carbon credits up to premium? That’s something to watch out for in the market once the CCP-labeled credits are up and running. 

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Miner Rio Tinto’s Carbon Problem and Offset Solution

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The world’s second-largest miner – Rio Tinto – revealed that it won’t be able to reach its 2025 decarbonization target of 15% carbon emissions reduction. That’s unless it buys carbon credits to offset its emissions.

The mining giant had also made an $800 million “write down” on its Gladstone alumina refineries due to the higher costs of annual emissions cap under the Albanese government’s tougher “Safeguard Mechanism”. 

Writing down or taking an impairment charge of its assets happens when a company’s projected cash flows are less than what the asset is currently accounted for in the books. 

Rio Tinto didn’t expect and account for the impact of the imposed carbon tax on its long-term cash flow projections. Thus, the miner must change the projections that resulted in the $800 million reduction in its Australian alumina refineries asset. 

This claim to miss its net zero targets is one of the first admitted by a mining giant, highlighting the struggles faced by heavy industries in abating their carbon emissions.

According to Rio Tinto’s CEO, Jakob Stausholm, achieving the 2025 climate target is hard because developing new solutions takes time. He specifically said that:

“There is a lot of technology that doesn’t exist and has to go through an R&D funnel, and that just takes a long time.”

Rio Tinto’s Carbon Emissions and Pathway

The miner aimed for net zero emissions by 2050, in alignment with the Paris Agreement. To reach this climate goal, the company sets a 15% reduction in direct and indirect emissions by 2025, and 50% by 2030, based on the 2018 baseline. 

But Stausholm previously said that he regretted those targets while noting that reaching them calls for making tough choices. 

Mining is responsible for only 20% of Rio Tinto’s carbon emissions. About 50% is from its Australian refineries, where the impairment charge comes from, as they’re energy-intensive and run by coal.

In 2022, the mining giant was able to cut Scope 1 and 2 emissions by 7% relative to 2018 levels. The reduction – from 33.7 – 30.3 Mt CO2 – was mainly due to employing large-scale renewable energy that powers its operations. 

Scope 3 emissions prove harder to abate, almost at 584 Mt CO2. Rio said that estimating Scope 3 emissions remains challenging but claimed that they’ve made improvements in accuracy in 2022.

Over 94% of this pollution comes from the downstream processing of iron ore, bauxite, and other products, while over 76% of these processing emissions occur in China. 

Rio Tinto also expects that its emissions will rise (1.5 Mt CO2) as production grows between 2023 and 2025. To help address this, and still reach its 2025 climate target, the miner developed a plan for abatement projects. These projects have a total of 4.2Mt CO2 abatement. 

To reach its 2030 target, the mining giant has to employ these decarbonization levers: 

Switching to renewables
Abating emissions from alumina refineries and minerals processing 

In line with those strategies, Rio Tinto established the following specific abatement programs and their emissions reduction potential.

Carbon Credits Are Key in Rio’s Net Zero Goal

The other required abatement particularly includes investment in nature-based climate solutions (NbS). That means investing in high-integrity carbon offset credits, which according to the company play a greater role in their net zero pathway.

You can see the latest world carbon prices on our dashboard here.

In fact, Stausholm said their 2025 goal will still be achievable through carbon credits as their “last resort”. Securing high-quality carbon credits is crucial for the miner to decarbonize their operations. 

In particular, Rio Tinto’s ambition is to “build a sustainable and long-term carbon credit portfolio generating 1.7 million tonnes annually by 2030”. 

The company will focus on investing in carbon credits in regions where they’ve significant emissions, including North America and Australia. They then plan to move upstream into co-development or co-financing of carbon offset projects for the long-term security of earning quality credits. 

Delivering its net zero emissions strategy requires Rio Tinto to invest $7.5 billion in capital between 2022 and 2030. Out of that, about $1.5 billion will be needed over the period 2022 to 2025. 

Last year, the miner’s decarbonization-related capital expenditure was just $94 million, far below their original estimate of $500 million. But decarbonization investment across the rest of the Rio Tinto Group will ramp up beyond 2025.

The company will continue to explore carbon capture and mineralization options leveraging its exploration and geological expertise. Carbon capture technologies, though emerging, have been the go-to solution for many heavy emitters.

Rio Tinto peers such as BHP and Fortescue Metals Group are so far on track to reaching their climate goals. BHP seeks to reduce Scope 1 and 2 emissions by 30% by 2030, while Fortescue aims to hit net zero emissions by the same year. 

As governments’ carbon tax and other schemes become law, companies will be forced to account for these costs in their cash flow projections. And Rio Tinto is not the only company that will face this problem. Other heavy emitters in Australia, Canada, and Europe may expect to see this coming their way, too. 

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Saudi’s $2.6B Bet on Critical Metals for Clean Energy Transition

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In a strategic move to diversify its economy away from oil, Saudi Arabia has entered the global mining industry with a $2.6 billion deal to buy a 10% stake in Vale SA’s base metals division. 

The Saudi investment is a joint venture between the country’s sovereign wealth fund and state mining company, Ma’aden. The deal with Brazil’s largest miner will close in early 2024, pending regulatory approval. 

A Huge Bet on the Mining Industry 

The funding gives the Gulf kingdom access to various mining sites that produce critical minerals and metals. These industrial materials are necessary for the energy transition, particularly in meeting the surging demand for electric vehicles. 

Crown Prince Mohammed bin Salman focuses on the mining industry as part of diversifying the economy under Saudi Arabia’s Vision 2030. Initial investments will focus on minority equity positions in iron ore, copper, nickel, lithium, and other minerals.

Betting on these alternative energy sources, Saudi’s $170 billion mining plan will continue to attract global miners. Owning 17% of the world’s petroleum reserves, the Arab country believes that it sits on over $1 trillion worth of untapped minerals. 

The kingdom seeks to explore those deposits and ramp up production to realize its decarbonization goals. Its $2.6 billion stake at Brazil’s largest miner provides the country interests in copper, nickel, and other critical minerals. 

The funding represents Saudi’s first major investment into the global mining industry, according to the JV’s executive director Robert Wilt.

Critical Metals Powering the Energy Transition

Vale aims to expand mining for copper and nickel, which are both in demand for manufacturing electric cars. In line with this, the mining giant with a market cap of $67 billion, plans to invest up to $30 billion on new projects in its home country, as well as Canada and Indonesia. 

The miner claimed that the new funds from Saudi raised their base metals division’s implied value to $26 billion. 

Vale’s chief executive asserted that the company is “positioned to meet the growing demand for green metals essential for the global energy transition.” 

And one of these critical metals is lithium, which Saudi aims to build processing facilities for as part of its plan to establish a battery supply chain. Last year, Ma’aden expressed intention to spend big in exploring battery metals over the next two decades.

In fact, the country is planning to develop a $2 billion EV battery metals plant in partnership with EV Metals Group. EVM Arabia is set to set up a $905 million battery chemicals complex in the Arab country later this year. The kingdom has also pledged to buy over a 10-year period up to 100,000 EVs.

With these plans, Saudi is joining the global movement of securing lithium, which is the key element in making EVs. Leading automakers are scrambling to get enough of this critical metal, a.k.a white gold. 

For instance, Tesla has started building its own $1 billion lithium refinery in Texas. The EV pioneer also said that it needs to invest about $374 billion to mine and refine the metal. 

Luxury carmaker Mercedes-Benz also aims to directly source high-quality lithium to scale up its full EV battery production. Other carmakers have the same plans as part of the global transport electrification to drive the clean energy transition.

As demand for EVs continues to grow, lithium companies are also ramping up their efforts to supply the critical metal. American Lithium Corporation, for example, provides safe and stable supply of this metal with its two large lithium deposits. 

With Saudi Arabia’s goal to become a global leader in the minerals and metals market, the world can expect billions of dollars of more investment into the sector, driving the transition to a global clean energy system.

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