The Death of Diesel Gives Birth to ZEVs

A new report from the Gladstein, Neandross & Associates (GNA) highlights the growing shift towards zero-emission vehicles (ZEVs) and renewable fuels in the transportation sector. 

The fourth annual State of Sustainable Fleets Market Brief reveals that public policy and funding have shifted sharply towards building the ZEV market and phasing out diesel engine development at an accelerated pace. 

This shift is driven by a combination of regulatory requirements, public incentives, and market demand. Furthermore, advances in technology and increasing concerns about climate change and air pollution further encourage moving away from diesel.

The GNA report concludes that:

“The past 18 months have laid the roadmap for a zero-emission future in many states and produced early signals that the era of the diesel engine, the workhorse of HD [heavy-duty] vehicles, will end sooner than many predicted.”

Increasing Regulatory Pressure for ZEVs

According to the report, some clean fuels and vehicles are now superior to gasoline- and diesel-fueled vehicles for many fleet applications. Also, the use of renewable fuels and advanced tech drivetrains has been growing. 

One major reason is the increasing regulatory pressure to transition away from conventional fuels to cleaner alternatives. California’s zero-emission vehicle or ZEV sales mandates, in particular, have forced market players to embrace the change.

Then the US Environmental Protection Agency set the most stringent standards ever on the transportation sector’s emissions that contribute to air pollution. This adds tens of thousands of dollars – $30,000 – to the cost of new diesel engines while also requiring further ongoing maintenance. 

Meanwhile, public sector funding fell while incentives and subsidies soared to historic highs following the introduction of the Inflation Reduction Act (IRA) last year. 

Public incentive funding for clean fleet technologies and vehicles will average $32 billion each year for the next 4-5 years. The focus of this investment will be on the ZEV market and infrastructure. 

A total of 13 states have passed or are considering some form of California’s 2020 Advanced Clean Trucks (ACT) mandate for manufacturers to start selling ZEVs. 

Notably, 75% of the surveyed fleets that have never used clean drivetrain technologies before plan to up their use in the next 5 years.

Furthermore, the production capacity for renewable diesel (RD) to replace fossil diesel has doubled in 2022. Uptake by private sector fleets surveyed grew about 10% for the same year compared to 2021. 

In particular, almost 30,000 medium-duty battery-electric vehicles (BEVs) have already been ordered. Whereas plans to use more clean drivetrains and fleet technologies (e.g. propane, battery-electric, and fuel-cell electric vehicles) were still over 80%.

Other Key Findings on Clean Transportation 

The report also showed another significant result: supply and demand for renewable diesel grew in states with carbon credit markets. Domestic RD production doubled from 2021 (800 million gallons) to 2022 (1.7 billion gallons). 

There has been a drop in the credit price linked to big volumes of renewable fuels traded in California’s carbon credit market. But estimates say that the industry can still achieve its production capacity goal in 2024 – 5 billion gallons

Additionally, renewable natural gas replaced nearly all fossil natural gas in California transportation for the second year in a row. Even more remarkable is the finding that orders for medium-duty and heavy-duty BEVs grew by a whopping 640%. And 92% of the fleets surveyed have plans to increase their use.

The report also reveals that the public hydrogen station network grew by 12% to 54 stations in 2022. It also suggests that hydrogen fuel projects unveiled last year will bring over 900 metric tons a day by 2023

Hydrogen fueling network developers also plan to construct stations outside of California across the central mid Atlantic and southwestern U.S., which is a first for public fueling networks. 

ZEVs and Carbon Credits 

California’s Low Carbon Fuel Standard (LCFS) market has been driving the demand for zero emission or clean technology in the transportation sector. The program creates a marketplace for technologies that generate carbon credits based on emission reductions brought by fuel or energy use.

Carbon credits are generated from initiatives that reduce, remove, or avoid carbon emissions. Each carbon credit represents one tonne of carbon reduced by using ZEV and other clean technologies.

The supply of several low carbon fuels such as RD and RNG had increased. This pushed down the price of carbon credits for the past 2 years as seen in the chart. 

The falling price for a carbon credit traded under the LCFS market continued in 2022, dropping 44%. In the same year, credit prices averaged $99.66 per metric ton (MT) and declined to as low as $56.10/MT in late October.

That is a significant drop from the highest peak of $219/MT in February 2020. Type 1 credit transaction – credits sold on the “spot” market –  totaled to over $560 million. Overall transactions surged past $3.7 billion in 2022, marking a 24% increase in credit volume. 

A big part of the transactions happening on the California LCFS market involves Tesla, the largest seller of carbon credits so far. The biggest EV maker had, again, grabbed attention with its 12% increase in Q1 2023 revenue from selling carbon credits.

The automaker recorded $521 million carbon credit sales in the first quarter compared to $467 million in Q4 2022. Tesla has been earning big revenues from carbon credits for the previous years, reporting a record $1.78 billion in 2022 alone.

Overall, the State of Sustainable Fleets report demonstrates that significant progress is being made towards a more sustainable and equitable future in the transportation sector with zero-emission vehicles. The growing momentum towards ZEVs and renewable fuels will bring diesel to an end, driving carbon credits market up. 

The report provides a powerful tool for sparking collaboration and promoting decarbonization in the commercial road transport sector.

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Israel to Fail 2030 Climate Pledge

Israel is lagging behind its own climate pledges, according to a report published by the Environmental Protection Ministry.

The country is set to reduce its global warming emissions by just 12% by 2030. This is well below the 27% target it pledged to the United Nations Framework Convention on Climate Change. 

The report states that only 19% of energy will be generated by renewable sources by the end of the decade, compared with the official goal of 30%

These revelations come at a time when countries around the world are working to reduce their carbon footprints to combat the effects of climate change.

Failing to Meet Climate Pledge

The annual report reviewed progress until 2021 on official emissions reduction targets across the economy and various sectors. The benchmark for reduction levels is the rate in 2015. 

The report predicts gaps between targets and realistic achievements on almost every pledge that the Israeli government has made.

Largest dump site in Israel, Dudaim

The UN expects Israeli emissions from solid waste to drop by at least 47% by the end of the decade, compared with 2015, but these will likely only diminish by 19%, according to the report.

The electricity sector is meant to see a 30% drop in emissions by 2030, compared to 2015. But it is likely to only reach a cut of 21%. Industry is also supposed to meet a 30% reduction, but is likely to reduce its emissions by just 17%

Most of the emissions cuts in 2021 came from the electricity sector as a result of using less coal. Emissions from waste dropped by 4% during that year, but increased by 13% in industry and by 2% in transportation.

The report also shows that Israel is far less ambitious than other developed nations in reducing its carbon footprint. It states that Israel only reduced its total emissions throughout 2020 by 2%, compared with 11%-20% in other Western countries. 

A further 3% were reduced in 2021 but this pace is nowhere near enough to hit the 27% target by 2030, the report says.

The reasons for this slow pace are huge delays in reduction plans and lack of budget for implementing them.

What the Israeli Government Should Do 

To meet its targets, Israel needs to pass a Climate Law that obliges the government to meet its goals, sets out the infrastructure for doing so, and provides certainty to the market. The report lists a number of steps that the government should take to speed up and meet its declared targets. These include the following measures:

Converting methane from sewage treatment plants into energy, 
Developing and implementing programs to slash emissions in agriculture
Ensuring energy efficiency in general, closing petrochemical industries in the northern city of Haifa by 2030, and 
Moving much faster towards replacing fossil fuels with renewable energy to generate electricity.

Additional steps include closing coal-fired power plants, making solar panels mandatory on all new buildings, adapting the electricity distribution network so that it can cope with more renewable energy, and providing cash incentives to install EV car charging stations and solar panels on sites that are already in use, such as parking lots.

Meeting Targets with Carbon Credits 

Carbon credits could play a role in Israel’s efforts to meet its climate pledge. A carbon credit is a permit that allows a company or country to emit a certain amount of greenhouse gases.

Carbon credits can be traded on carbon markets, allowing companies or countries to offset their emissions by funding emissions reduction projects in other countries. In this way, Israel could offset some of its emissions by investing in emissions reduction projects in other countries.

The use of carbon credits has been controversial recently, with critics arguing that they allow polluters to continue polluting. However, supporters of carbon credits argue that they can provide a source of funding for emissions reduction projects in developing countries that might not otherwise have the resources to undertake such projects.

In conclusion, Israel is falling behind on its climate targets, and urgent action is needed to reduce the country’s emissions.

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Livestock Carbon Credit Marketplace Secures Seed Investment

Athian, a pioneering livestock carbon credit marketplace, successfully completed its seed funding round with key investors including California Dairies, Inc. (CDI) and DSM Venturing. The funding will drive innovation and environmental solutions for livestock producers.

This Indianapolis-based company offers economic incentives for sustainable farming. Athian’s platform benefits global food system sustainability and reduces climate warming.

DSM Venturing is the corporate venture arm of Royal DSM, a global company in Health, Nutrition & Bioscience. CDI is the largest dairy farmer-owned cooperative in California and second largest in the U.S. CDI’s investment supports the continued improvement of its environmental footprint.

Other participating investors are Elanco Animal Health Incorporated, Tyson Ventures and Newtrient LLC. Commenting on the fundraising, Athian CEO Paul Myer said: 

“This announcement not only expedites our reach into international markets but also accelerates practical environmental solutions that give farmers new revenue streams and helps companies deliver on their sustainability commitments throughout the value chain.”

World’s First Carbon Credit Program for Livestock

Emissions from livestock production have become a hot issue with some countries placing restrictions on livestock farming like New Zealand. The world’s dairy leader sought to levy farmers for their cows’ carbon footprint.

Data shows that animal agriculture accounts for at least 16% of global GHG emissions, contributing to deforestation and biodiversity loss. Methane, nitrous oxide (N2O) and carbon dioxide comprise livestock’s total emissions. The first two are a lot more potent than CO2 in heating up the earth.

Livestock supply chains emit GHGs in many ways. These include methane production during animals’ digestive process, feed production, manure management, and energy consumption. Here are some important facts about livestock emissions.

Athian’s innovative approach supports the entire value chain’s sustainability commitments. Its platform rewards farmers for implementing sustainable practices that can slash the industry’s footprint. 

Example of this practice is improving fertility in dairy cattle which can reduce methane emissions by up to 24%. Another is to cut emissions from enteric fermentation by changing the livestock’s diet such as introducing seaweeds. Athian helps capture and claim carbon credits earned through efforts like these. 

The company monetizes greenhouse gas (GHG) reductions through the sales of carbon credits, creating value for the supply chain. This becomes more crucial with credits accounted as carbon assets under Scope 3 emissions

Cloud-based, Industry-wide Platform

Athian’s livestock carbon credit platform is to help the beef and dairy value chains capture carbon and earn the corresponding credits for that. The company aggregates, validates, and certifies carbon reductions by livestock farmers throughout the entire value chain using software. 

Its cloud-based marketplace is an industry-based analytics tool that enables the creation, banking, buying, and selling of certified carbon credits.

The latest investment round advances Athian’s entry into international markets while promoting environmental solutions that give farmers new revenue streams. 

The collaboration focuses on carbon incentives and positive climate change impacts. Scott Horner and Darrin Montiero will join Athian’s Board of Directors. They will serve in an observer capacity, further strengthening the partnership.

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Duke Energy to Invest $145B in Clean Energy Transition

Duke Energy released its annual climate report outlining its sustainability and net zero goals, performance, and progress, with the plan to invest $145 billion over the next ten years as it takes the lead in the clean energy transition.

In its Impact Report, one of America’s largest energy holding companies claimed to expand its 2050 net zero goal to cover over 95% of its footprint including Scope 2 and relevant Scope 3 emissions, making it one of the first in the sector to do so. 

Duke Energy also said that its $145 billion clean energy investment will generate $250 billion in economic output. It will also support over 20,000 additional jobs created each year while generating more than $5 billion in additional property tax revenue over the next 10 years.

Katherine Neebe, Duke Energy’s chief sustainability and philanthropy officer, noted that:

“We’re pursuing federal funding and leveraging tax credits to lower customer costs for clean energy technologies and other aspects of the energy transition. Our balanced pace of change will enable a future that offers reliable, accessible and affordable energy for all customers and areas we serve.”

Duke Energy Carbon Emissions

Since 2005, electric utilities in the US have cut down the sector’s carbon footprint by about 40%. 

The power sector has a major role in helping other sectors achieve their own net zero goals. And Duke Energy is ahead of the industry average, consistently decarbonizing to meet its climate goals. 

The company boasts its investments as one of the largest clean energy transitions in the industry. 

Duke plans to invest over $145 billion in capital between 2023 and 2032, and about 85% of that will support the clean energy transition and its net zero by 2050 goal.

$75 billion will be to modernize and strengthen the nation’s largest investor-owned electric grid. 

The energy company also seeks to invest another $40 billion in zero-carbon power generation. These include nuclear, solar, wind and battery storage resources, as well as investing to extend the life of their carbon-free nuclear fleet. 

Duke Energy has a diverse, clean generation portfolio. 

In 2022, over 40% of its electricity generation was from carbon-free sources, renewables and nuclear. 42% was from lower-carbon natural gas, which emits about 50% as much CO2 as coal when burned. And about 17% was from higher-carbon coal and oil. 

In sum, owned and purchased renewables are equal to about 11% of Duke Energy’s electricity generation. 

For its operational footprint, the Fortune 150 company was able to achieve a 44% reduction in carbon emissions from electricity generation from 2005 through 2022. It is also well-positioned to exceed its Scope 1 2030 goal of a 50% emission reduction.

Last year, the energy firm expanded its second interim target of an 80% reduction in 2040. Below is the carbon emissions of Duke Energy for the past three years in comparison.

By addressing 95% of its Scope 1, 2, and 3 carbon emissions, Duke Energy is leading in decarbonizing the industry. It shows that the company is serious about slashing its footprint across its entire value chain. That includes emissions from raw materials through to business operations and down to customer end-use. 

To put that ambitious goal in perspective, that involves more than 100 million metric tons of CO2e each year over 30 years until net zero. 

For emissions beyond the company’s direct control (Scope 2 and 3 emissions), a third-party analysis set a goal of a 50% reduction by 2035 as part of its net zero targets.

Duke Energy’s Path to Net Zero 

The energy firm believes that a diverse energy mix is key to reaching climate goals and transitioning to clean energy. It has the biggest planned coal retirement in the country, aiming to retire 16 GW by 2035, pending regulatory approval.

In line with the International Energy Agency (IEA) Net Zero Energy (NZE) scenario, analysis revealed a pathway for Duke to reach a net zero electric portfolio by 2035.

Under IEA’s scenario, electric utilities in developed countries need to continue to reduce emissions below zero. This will be through the use of CCUS – carbon capture, use, and storage – technologies for biogas or biomass-fired electric generation. 

In the case presented in the chart, Duke Energy’s generation portfolio has to more than double in size by 2035, even with the retirement of its conventional fossil-fired assets. Along with that is the installation of over 15,000 MW of ZELFRs (dispatchable zero-carbon resources).

ZELFRs include new nuclear, gas turbines fueled by green hydrogen, CCUS, or long-duration storage. 

Duke Energy and industry partners have applied for DOE funds for a front-end engineering design study to assess an integrated carbon capture and sequestration project at the firm’s facility in Edwardsport Indiana. The project’s demonstration of capturing carbon after combustion can be a vital step in the path to net zero emissions.  

Another lever is expanding renewables. By 2035, Duke expects to have 30,000 megawatts (MW) of regulated renewables, including utility-owned renewables and renewables from purchased power agreements (PPAs).

The company will also decarbonize its natural gas business by focusing on methane detection and reductions. This plus the overall goal to reduce upstream emissions related to the purchased gas as well as downstream emissions due to customers’ use of the gas products sold. 

The company has also been investing in carbon offset credits but it didn’t reveal how much it will purchase as part of its climate goals. It runs a voluntary program that allows customers to buy green “blocks” from Piedmont, Duke’s subsidiary. A block is a combination of environmental attributes from carbon credits and renewable natural gas.

In sum, here’s what Duke Energy’s road to 2050 net zero emissions looks like.

To achieve those goals, policies, technologies, consumer behaviors, and supply chains that don’t exist yet are developed almost immediately. 

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Italian Startup Raises $60M in Total to Boost Energy Storage

Italian energy storage company, Energy Dome, has raised $44 million in Series B round, totalling to $60 million in all, while enabling its patented storage solution to commercially scale up globally.

Energy Dome is a climate tech startup providing long-term solutions for energy storage by using dispatchable solar and wind power alternatives. 

Storage for Renewable Energy 

Renewable energy sources are the future of the energy transition. Their use has been growing as entities look for ways to reduce their carbon footprint. They’re not only a clean and sustainable source of power, but they’re also good both for people’s and planet’s health.

However, the sun is not always shining while the wind is also not blowing all the time. It means storing these green power sources is critical to fully maximize their use and they’re vital in decarbonizing the power sector.

Just recently, the US President Biden proposed a climate rule requiring power plants to reduce their emissions using carbon capture. 

In Europe, coal is no longer the most used fuel in large combustion plants while their emissions have declined significantly. Stricter emission limits and climate policies aimed at growing the use of renewables or cleaner fuels will drive further declines in the sector’s emissions.

But storage remains a major concern in advancing and scaling up the use of renewables worldwide, calling for technological innovations. This is where Energy Dome steps in to provide the energy storage solution. 

Energy Dome and its Patented CO2 Battery

Since it began operation in 2020, Energy Dome has progressed from a mere concept to testing at multimegawatt scale. The Italian climate tech startup is pioneering a patented solution for energy storage and power grid decarbonization. 

The company invented CO2 Battery, which it claims to be an energy storage system that allows cost-effective storage of big amounts of renewable energy. 

In June last year, the startup launched the first CO2 battery in the world saying that it can be used quickly around the globe. The battery works for storing both wind and solar energy.

Energy Dome also said CO2 is the perfect fluid to cost-effectively store power through its closed thermodynamic process. That’s because it’s one of the few gasses that they can manipulate both in its gaseous and liquid forms. 

Whenever energy is needed, carbon dioxide warms up, evaporates and expands, turning a turbine and producing power. The gas can also be condensed and stored as a liquid under pressure without needing extremely low temperatures. This results in high density energy storage with no CO2 emission releases into the atmosphere. 

The Milan-based company said that its patented CO2 Battery can store renewable energy with “75% RTE (AC-AC, MV-MV)”. That means each unit of renewable energy the battery stores, it can return 75% for future use. 

Asserting their technology’s readiness and performance, the startup’s founder and CEO Claudio Spadacini noted that:

“Our CO2 Battery is ready for the market and, after closing the Series B round, we are ready to guarantee its performance to any customer that is real about getting rid of fossil fuels and substituting with dispatchable renewable energies.”

$44 Million for Expansion

Energy Dome’s Series B round is led by venture capital firms Eni Next and Neva SGR, giving the company about $44 million, bringing its total raise to around $60 million. 

Other Series B investors include Barclays’ Sustainable Impact Capital, CDP Venture Capital, Novum Capital Partners, and 360 Capital. They also support Energy Dome’s previous fundraising rounds. New investors joining this round are Japan Energy Fund and Elemental Excelerator.

The company will use the funding to expand its team and global operations and commercialize its CO2 Battery design.

Energy Dome manages to catch investors’ interests globally by being able to scale its business to become fully commercial only in 3 years. Within this short timeframe, the company has built a network of power producers, corporate customers, and facilities. 

That capacity resulted in a pipeline of over 9 GWh in global markets including Europe, the U.S., Australia, and India.

The tech company is also planning to make 2 standard 20MW–200MWh frames commercially operational by the end of 2024. This project is underway with the first unit in the process of manufacturing.

The proceeds will also back Energy Dome’s expansion in the U.S. market to take advantage of the opportunities provided by the Inflation Reduction Act and the Investment Tax Credits for energy storage.

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The Evolution of Biomass and Its Generations

The rising global demand for energy and the draining of fossil fuel stocks have fueled the growing interest in biomass and its generations, particularly biofuels in the last decade or so.

But more critically, along with new discoveries and breakthroughs during the 20th century, humans also started to face one of the world’s most serious problems – climate change.

For the most part of that century, research on biomass almost followed the price of fossil oil. And there has been a growing concern on the environmental impact of liquid fuel use in the last five decades.  

For example, more than 8 billion liters of gasoline are consumed to fuel transport vehicles each year in Canada. This and the alarming concern over carbon emissions led to greater attention on the use of biofuels. Their use often becomes a more eco-friendly option because their carbon balance is almost neutral while the fossil-derived fuels like diesel or gasoline are damaging to the planet.

This article will trace the evolution of biomass and its three generations, discussing their major attributes as well as their key benefits and advantages. 

But first, let’s define what biomass is and why the world has to shift to using it for biofuels.

What is Biomass?

Biomass is renewable organic material, meaning it comes from living organisms such as plants and animals. It remains to be an important source of fuel in many countries and was the largest source of total annual energy consumption in the U.S. until the mid-1800s. 

Biomass has always been a reliable source of energy that has been narrowed down to renewable sources of carbon. 

Ethanol is one of the best known biofuel in the U.S.A. while other types of this fuel, e.g. biodiesel, are also used in other countries such as Asia and Europe. 

In the early 19th century, ethanol was called spirit oil until it was tested and found useful for internal combustion engines. Ethanol phased out whale oil then it was replaced by petroleum distillate for lighting. At the end of the century, ethanol was introduced in the transportation sector.

At the turn of the 20th century, fossil-derived products replaced ethanol right until today. But with the intensifying issue on the planet-warming fossil oil, biomass starts to take the centerstage of energy production. 

And though there are many ways to make clean energy from other renewable sources, biomass is vital because those other sources don’t create liquid fuels that can fuel transport vehicles. One thing, however, is that conversion of biomass into biofuel presents a big challenge. And the more complex the biomass chemical composition gets the more expensive the conversion process becomes.

The U.S. is the forerunner of the biofuel market, aiming to substitute 20% of its fossil fuels with biofuel by 2022. 

Based on its production method and specific feedstocks used, biomass is grouped into three categories, also called generations. 

The First-Generation Biomass

First-generation biomass is from edible crops such as corn and sugarcane, and often involves producing ethanol and biodiesel. 

C6 sugars, fermented by traditional or GMO yeasts, is the primary feedstock or raw material used for producing ethanol. The common feedstocks used for producing bioethanol are sugarcane and corn. Other food crops used or considered to make first-generation biofuel include barley, whey, and potato wastes. 

Bioethanol from sugarcane 

Sugarcane is a common feedstock for biofuel production and the process involved to make bioethanol is pretty simple. The plant is crushed in water to extract sucrose, which is purified to produce ethanol or raw sugar. 

Here’s what the process looks like as illustrated in a study by Harcum and Caldwell, 2020.

Ethanol Production with Sugarcane

Brazil is one of the biggest consumers of bioethanol from sugarcane. 

Given the simple conversion process, producing ethanol from sugarcane biomass is beneficial for producers. However, the rising sugar prices create a problem for the bioethanol market. 

When the cost of producing raw sugar is cheaper than making ethanol, the market chose to focus on the former. It became more profitable to produce raw sugar out of sugarcane than make ethanol.

But all thanks to corn, it makes bioethanol production still viable. 

Bioethanol from corn

Corn is another major source for production of biofuel. This common crop needs a preliminary hydrolysis of starch to extract the sugars from corn, which is fermented for ethanol. 

The good news is that the cost of the enzyme used during the hydrolysis process is not that expensive. And the value of the corn market is so huge, making it not an issue as a source of biomass for ethanol production. Not to mention that the by-products of the process is also a valued product used as animal feed. 

Biodiesel production 

Alongside ethanol, biodiesel is the only other biofuel commercially scalable. Unlike the simple process of producing bioethanol, making biodiesel is quite different because it’s a chemical process. 

Of course, it also uses biomass mostly from seeds and oily plants. Yet, the production process itself largely relies on separating the bio oils chemically to convert them into biofuel. 

The process called transesterification involves breaking down the bonds that link the long chain fatty acids to glycerol, which is then replaced with methanol.  

Producing biodiesel also needs methanol and its price is the most important factor that affects its production. This means that the use of less costly sources like used oils or oil from non-edible plants become more significant. 

The Disadvantages of First-Generation Biomass

Producing bioethanol from sugarcane or corn and biodiesel from edible oils depends on the prices in the international market. These feedstocks also contribute to food price fluctuations by competing with food production.

As mentioned earlier, sugarcane is a valuable raw material for making sugar. So making it a feedstock for producing bioethanol competes with sugar production. 

The same goes with the case of corn, which is even more in demand for making a wide variety of food products. In the US, corn is the dominant crop for producing cereals, snack foods, and more. 

Moreover, the processes involved in producing both bioethanol and biodiesel can have negative environmental impacts. 

For instance, the International Energy Agency projected that land area needed for producing biofuels from food crops will increase 3x to 4x globally over the next decades. The change in land use is even more rapid in North America and Europe, contributing further to deforestation concerns. 

Add to that the high water use of biofuel production. In fact, water scarcity, instead of land, would be the major limiting factor in producing biofuels in many situations. 

About 70% of freshwater used worldwide is for agricultural purposes, while producing 50 million gallons of ethanol/year uses about up to 200 million gallons of water each year

That means more biofuel production will require more water, contributing to the global water shortage the world is facing. These and other negative impacts turn the attention of biofuel producers to the next generation biomass.

Second-Generation Biomass

Second-generation biofuels are from various feedstocks, especially from non-food lignocellulosic biomass. Biomass sources for producing this category of biofuels come in three types:

Homogeneous, e.g. white wood chips 
Quasi-homogeneous, examples are agricultural and forest residues 
Non-homogeneous, includes low value feedstock as municipal solid wastes 

What makes this generation of biomass more desirable than their predecessor is the lower cost of the raw materials. Price, after all, has been the greatest incentive of production. Plus, they don’t compete with food crop production. 

There’s a catch, however. Second-generation biomass is often more complex to convert and requires advanced technologies. 

Converting this generation of biofuels is possible via two different pathways: bio and thermo. A simple scheme of these production pathways is shown in the diagram below. 

Simplified scheme for the “bio” and “thermo” pathways for conversion of lignocellulosic biomass into biofuels. Source: Lee and Lavoie, 2013.

Thermo biomass production

As the word suggests, the biomass is heated using an oxidizing agent, if needed, to convert it to desired product. In particular, to make biochar, the biomass goes through a torrefaction process (heating at low temperatures – 250°C to 350°C). 

In elevated temperatures, 550°C to 750°C, biomass conversion happens in a process called pyrolysis with a major product, bio oil. Whereas in much higher temperatures, syngas is mostly produced through gasification, with bio oils and biochar as by-products.

Biochar, a solid biofuel, is gaining a lot of traction lately due to its carbon reducing properties. And in some parts of the world, lignocellulosic biomass is inexpensive, making biochar production even more profitable. 

But the most homogeneous and costly biomasses are not a good candidate for the available conversion technology. Certain technical and economical limitations exist to scale up thermo processes using this biomass category. 

This is where quasi-homogeneous and non-homogeneous biomass sources would be more suitable.

“Bio” biomass production

This pathway is similar to a pulping process wherein cellulose is extracted from the lignocellulosic biomass. But this process comes with a technological challenge: it has to produce the purest cellulose while removing inhibitors without using too much energy or a lot of chemicals. 

The good news is that there’s an alternative to make the process less expensive such as using lignin and hemicellulose. 

Lignin, in particular, is gaining a lot of attention lately. As the second most abundant natural polymer found in woods and plants, it offers plenty of advantages. It can be used to produce biofuels, biochemicals, and other bioproducts. The pulp and paper industry is using it as a fuel, providing a low-carbon source to power the sector. 

Apart from being a good source of biofuel, lignin is also great for making high value chemical as well as adhesives due to its aromatic monomers. Industry experts say that this second-generation biomass can open a new market for bioplastics and bioadhesives. 

Even the construction industry found lignin to be a good alternative for bitumen as asphalt binder. Lignin-based bio-bitumen can reduce the planet-warming emissions of asphalt. To know more about this biomass source, read this article.  

Third-Generation Biomass

Though lignin has many benefits and applications, algal biomass, also known as  third-generation biofuels or “oilage”, shows greater potential. This biofuel comes from algae, which has a very distinctive growth yield as compared with lignin. It is about 10x higher than the second generation biofuel. 

In addition to growing rapidly, algae require less land, and can grow in non-arable areas. Not to mention that the oceans are so vast enough to grow algae and other aquatic biomass sources. 

Algae can produce all sorts of biofuels such as ethanol, butanol, biodiesel, propanol, and gasoline. 

Producing biofuels from algae basically relies on the microbes’ lipid content. So species with high lipid content and high productivity are chosen for this purpose such as Chlorella. 

Algae or microalgae is also very capable of capturing CO2 from flue gasses or the air for photosynthesis. Under the right growing conditions, algae can capture CO2 as high as 99%. 

No wonder several startups are pouring their money and knowledge into studying and cultivating algae and other aquatic biomass for their carbon capture technologies. They have been harnessing the power of algae as an affordable method of locking away carbon at the gigaton scale.

Moreover, a Puerto Rico-based startup has been collecting seaweed (sargassum) and turning it into high-value, carbon-neutral products. These include bio-stimulants, emulsifiers for cosmetics and pharmaceuticals, as well as bio-leathers for apparel and fashion.

However, same with the first and second generation biofuels, there are some challenges barring the scale up of algal biomass. 

Technological concerns are more on developing the right process that can extract lipids from the aquatic biomass. There are also some prior processes needed before the extraction such as filtration to dewater the algae. 

Moreover, producing algal in industrial scale fuel requires large volumes of water, which presents a big problem for many countries. Canada, for instance, would find it a huge challenge where temperatures can be negative.

Not One or the Other, but maybe Together

Obviously, each generation of biomass has its own pros and cons to consider.

First-generation biofuels are well established worldwide, though they compete with food production for the use of feedstocks and arable lands. 

This propels interests towards second-generation biomass where inputs are less expensive as they’re mostly wastes from agriculture, forests, and municipalities. But their composition is more complex and needs more advanced processes, so scaling production proves to be difficult. 

Lastly, third-generation biofuels from algae address the issues on feedstock as they can produce biomass much faster, requiring less land. Yet, the technology available to ramp up production remains at its early stage, needing further study, development, and investment.

Ultimately, the world doesn’t have a choice but to choose greener ways to fuel vehicles and things that people use. This makes biofuels the future and producing them may not rely on one generation but a combination of the three. 

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The Impact of Carbon Credits on Renewable Energy Development

The boiling concerns on climate change have made renewable energy sources and their development a key topic of research. Companies that are leading the clean energy transition have been, or are, considering to leverage the carbon credit markets.

What does the current carbon market boom mean to startups that develop renewable energy projects? How should venture capitalists and impact investors assess them? 

In other words, how do carbon credits impact the development of renewable energy projects such as solar and wind farms? This article will explore the answers to these important questions and more using relevant case studies and data available. 

Let’s first explain what a carbon credit is and its role in energy transition. 

Carbon Credits and the Energy Transition

The global climate crisis caused by the over consumption of fossil energy needs urgent action. To address the rising temperatures threatening lives and productions, environmental policies were in place to drive renewable energy development globally. 

Common examples of these policies include carbon tax, carbon emissions trading, and government subsidies. Carbon emissions trading involves the use of carbon credits as market instruments that many find essential in fighting climate change. 

What are Carbon Credits?

Carbon credits are generated by activities, projects or any initiatives that avoid, reduce, or remove CO2 emissions. Over 95% of carbon credits in the market fall under the first two categories. 

That means projects lead to fewer units of carbon in the atmosphere as compared to the “business-as-usual” scenario. The types of credits that these projects often generate include renewable energy credits, clean cookstove credits, and e-mobile credits. 

Though they vary when it comes to specific climate objectives, they all share the same goal – to replace the “dirty” sources of energy with sustainable, cleaner and greener alternatives.

The remaining credits are carbon removal projects such as reforestation (nature-based removal) and direct air capture (technological CO2 removal). 

Industry estimates show that demand for carbon credits will soar up exponentially, primarily due to corporate net zero pledges. Large companies’ climate commitments will bolster trading of carbon credits in the voluntary market (VCM)

Over ⅓ of the world’s biggest publicly traded firms unveiled their decarbonization targets in 2022. They purchase carbon credits to offset their CO2 emissions that they can’t yet avoid or reduce, alongside direct CO2 reductions. 

The VCM has already reached $1 billion in 2021, and projections show that demand for voluntary credits will grow to up to 2 gigatons/year of CO2 reduced and removed.

Impact on Renewable Energy Development

So, how does carbon credits and their increasing trend impact the energy transition, especially the renewable energy development?  

Perhaps most significantly, carbon credits help support the cost of developing clean energy sources and make them more affordable. 

Currently, scaling green technologies such as solar mini-grids at the rate that matches the net zero scenario is almost impossible given their prices today. This is where carbon credits can be useful to lower prices for these clean energy products. And that would make these products affordable for low-income households.

Those who manage to use the credits in this way were able to have additional revenue streams while promoting clean energy.

Moreover, projects generating carbon credits in developing nations often have other outcomes benefiting the local community called co-benefits. For instance, the use of clean cookstoves can help improve the skills of women in Africa and their cooking conditions. These projects also provide health and social co-benefits such as eliminating or reducing harmful particulate matter from burning woods. 

Overall, the booming carbon credit market will be beneficial for startups or companies that are developing renewable energy projects. This market mechanism enables them to leverage the financing sector and drive more investments into renewables. 

According to the International Energy Agency (IEA), investments in renewable energy accounts for about ¾ of the growth in overall energy investment. And it has been rising at an average rate of 12% since 2020.

It now accounts for almost three-quarters of the growth in overall energy investment, and has been growing at an average annual rate of 12% since 2020.

The IEA believes this is a sign of going in the right direction when it comes to achieving the global climate goals. Still, the agency thinks that the rate is not fast enough to be on track in decarbonizing the global economy. 

Getting on track to net zero emissions by 2050 will need annual investment in clean energy infrastructure, including renewables, to reach around $4 trillion by 2030, says the IEA.

A significant part of that funding will be coming from the revenue of carbon credits or emissions trading. And though carbon credits differ from renewable energy credits, they are under the same tree and the former substantially impacts the development of renewable energy projects. 

To make it clearer, let’s provide you with a couple of case studies showing the significant effects of carbon credits in the creation of renewables and energy developers. Two major case studies stand out – China and India. 

Case Study #1: Wind Farms in China 

A study by Sun et al., (2020) found that carbon credits from emissions trading in China is more effective at promoting renewable energy development than imposing a carbon tax policy. 

Based on their findings, the authors also said that investors would prefer to put their money in renewable power under the compliance carbon credit market than carbon tax.  

In particular, without government subsidies, only by implementing carbon emissions trading policy can increase investment in wind power in China. More interestingly, the free allowance for CO2 emission reduction trading or carbon credits can offset any reduction in subsidies. 

That means the renewable energy development plan like the case of wind power is achievable even without increasing government subsidy. Specifically, the Chinese government can cut its total subsidy in wind power by about 4020 million yuan per year by reducing the carbon credit quote from 95% to 60%

The study, therefore, suggests that the establishment of appropriate emission quotas and trading prices of carbon credits can propel investors to continue supporting renewable energy development in China. 

Case Study #2: Solar Renewable Energy in India 

You can believe it or not but India has seen the fastest growth in renewable energy across all large economies. This is all thanks to private and foreign investments made into renewable energy projects in the country. 

Putting those investments into context, the 3rd largest emitter received ~$64 billion for renewable energy development from 2014 to 2019.

Back in 2015, India aimed to source 40%, or 500 MW capacity, of its energy from renewable energy by 2030. And the country had achieved that goal in 2021, with over 40% of its electricity capacity coming from non-fossil sources. 

So what attracts great interest from developers of renewable power in India? 

According to a report by the Institute for Energy Economics and Financial Analysis (IEEFA), there are enough boosts for them to pour their money into the sector. 

For one, the declining costs of solar modules propelled the growth of renewable energy in India. This, in turn, decreased the tariffs for the associated products.

Unfortunately, the Russian-Ukraine war and surging inflation pushed the financing costs higher, increasing interest rates for renewable energy developers. But the good news is that there are some levers that enhance returns for developers, encouraging them to build more projects. 

As seen in the chart above, revenues from carbon credits trading is one of the reasons that developers continue innovating. Selling carbon credits from renewable energy generation to developed countries became a viable source of extra income for developers. This further enhances their returns.

The IEEFA report particularly showed how renewable energy credits and other levers help renewable power project developers grow their income. Their findings suggest that sales from carbon credits can give them an additional 3% to their returns. 

And that is quite big enough financial incentive to keep developing projects that significantly reduce carbon emissions. Not to mention that they’re helping the country reach its net zero emissions goal by 2070. 

No wonder Amazon has signed a total of 720 MW worth of renewable energy purchasing agreements in India. It has also closed deals with partners such as Vibrant Energy, ReNew Power Global, Amp Energy India and Brookfield Renewable. The retail giant will manage all its energy trading through its subsidiary, AEI New Energy Trading. 

So, how should potential clean energy investors take advantage of the exciting disruption that carbon credit markets bring? Here are the top ways to keep in mind.

3 Ways Investors can Capitalize in the Renewable Energy Market

Evaluate companies carefully and critically

First of all, investors should evaluate which companies promise strong revenue carefully. Do they have a clear and detailed plan and strategy for their carbon credit generation?

Ensure that the company is reliable enough in forecasting their carbon credit sales or that their basic product value proposition is strong enough without the credits. Keep an eye on their carbon credits pricing and quantity assumptions. 

These are critical especially now that many startups in the renewable energy sector are hopping into the carbon credit bandwagon.

Provide support to portfolio companies

Next step is to provide necessary support to companies in developing their carbon strategies. For instance, suggest any opportunities that they can employ to expand their markets through carbon credits trading. 

Determine what aspects or areas to further improve to develop high-quality renewable energy projects. If investors can connect their portfolio companies with credit buyers, that’s even better. The key to delivering superb support is understanding the different types of activities qualifying for carbon credits. 

Explore investment opportunities

Lastly, explore any opportunities for investing in carbon credit pre-financing deals. Some developers would require upfront capital to kick-start their renewable energy projects. For investors, this kind of investment has the potential to bring a high return of over 20%

But, of course, just like other investment opportunities, investors still have to take caution in assessing the projects. Would their funding be worth the risk? 

Only with enough knowledge and information could they be able to answer that question. This and the bright projections of the growth of the global renewable energy market are a good sign for those interested to invest in the space and see more projects being developed.

Should you want to know more about renewable energy credits (RECs) and how they differ from carbon credits in broader terms, go over this complete guide. You’ll also learn how RECs work and how to buy them.

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NextGen CDR Unveils Massive 200K Mt Carbon Removal Credits Purchase

NextGen CDR Facility revealed the advance purchase of almost 200,000 tonnes of carbon removal credits from three different projects, including Summit Carbon Solutions, 1PointFive, and Carbo Culture, making it one of the biggest CDR transactions to date. 

NextGen is a joint venture between Swiss carbon project developer South Pole and Mitsubishi Corporation and is backed by founding buyers Boston Consulting Group, LGT, Mitsui O.S.K. Lines, Swiss Re, and UBS. 

The company aims to unlock the potential of large-scale carbon removal and plans to buy over 1 million CDR credits by 2025. 

When asked about the CDR purchase deal, Jim Pirolli from Summit Carbon Solutions commented that:

“Through this landmark purchase of CDRs, NextGen and their founding partners have taken a bold step to accelerate the implementation of the technologies and infrastructure required to permanently remove carbon dioxide from the atmosphere at a meaningful scale. We are thrilled that CDRs from our BiCRS project were selected for one of the largest, most important transactions of carbon removals in history.”

Buying Certified Carbon Removal Credits 

Climate scientists said that removing CO2 from the atmosphere, either through nature or technology, is critical to meeting the 1.5°C Paris climate goal. But the recent report from IPCC made it clear that the current rates of global CDR operations are not enough. 

The carbon removal market is still below the level to what the UN panel deems necessary for a livable future. 

The volume of NextGen’s advance carbon removal credits purchase is equal to about 25% of all CDR transactions made globally. They will be registered under the International Carbon Reduction and Offset Alliance (ICROA) endorsed certification standards, making the credits certified and trustworthy.

The carbon credits are from projects that provide long-term storage while removing large volumes of CO2 in the coming years. 

NextGen didn’t specify how many carbon credits will come from each project and their cost. But the CDR buyer said it targets an average price of $200 per tonne across its 1M tonne portfolio

The three projects that NextGen will be buying the CDR credits include:

Summit Carbon Solutions 

A portion of the 200k tonnes of CDR credits will be from Summit Carbon Solutions‘ $5.1 billion project. It represents the world’s largest tech carbon removal project, the Biomass Carbon Removal and Storage (BiCRS) project in particular. When completed, the project will remove over 9 million tonnes of CO2 per year.

To meet the stringent requirements of ICROA standards, Summit has developed a methodology for its BiCRS project that’s currently under review with the Gold Standard for the Global Goals. Gold Standard is one of the leading global registries through which CDR credits are verified to ensure project quality.

1PointFive

1PointFive is developing the world’s largest Direct Air Capture and Storage (DACS) project in Texas, an Occidental Petroleum initiative.

A part of NextGen advanced carbon credits purchase will include CDRs from this DACS project. Once operational, it will remove and store up to 500k tonnes of CO2 per year.

Carbo Culture

NextGen will also buy carbon removal credits from climate tech company Carbo Culture’s high tech biochar project in Finland. The manufacturer plans to produce high-quality biochar that can remove and store 2.5 million tonnes of CO2 by 2030. 

The Finnish company’s approach involves producing biochar at very high temperatures for  maximum carbon removal capacity, achieving 1000+ years of permanence.

Here’s what it looks like within NextGen’s CDR Facility:

Source: Mitsui O.S.K. Lines website

Scaling up the CDR Market

NextGen’s CDR portfolio offers best practice for project standard certification. Each project, like the ones above, will be certified and verified under ICROA standards to ensure highest environmental integrity. This 3rd-party assurance will also see to it that projects benefit not just the environment but also the local communities. 

Moreover, a robust MRV – monitoring, reporting, and verification – standards is crucial in the carbon removal market. It will help assure that the removal projects result in high-quality carbon removal credits that are additional, measurable, and permanent. 

NextGen CDR Criteria

NextGen is developing one of the world’s largest diversified portfolios of CDRs by using different technological approaches offering significant promise to scale. These include the following:

Biomass Carbon Removal and Storage or BiRCS, 
Direct Air Capture and Storage or DACS, 
Enhanced Weathering
High-temperature Biochar, and 
Product Mineralization 

Companies in NextGen will have access to those diverse global portfolios of carbon removal and storage solutions. This approach enables risk diversification for corporate buyers of carbon removal credits

In all, by providing access to deeper market expertise and pooling together buyers and sellers of high-integrity CDR credits, NextGen helps enable the carbon removal market to scale. Its landmark CDR deal sends a strong signal that corporations are serious in developing a market for high-quality CDR credits. 

More details on this news and NextGen CDR portfolio will be featured at the Carbon Unbound conference on May 11 in New York City.

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$62B VC Firms Form Venture Climate Alliance for Net Zero

The Venture Climate Alliance (VCA), an organization formed by 23 leading global venture capital (VC) firms, was launched to support early-stage climate tech startups to cut their emissions and tackle net zero by 2050. 

In revealing the alliance’s launch, a representative from one of VCA’s founding members, Prelude Ventures stated that:

“We invest in climate tech companies that are transforming multi-billion dollar industries… As public markets, asset managers, and policymakers implement 2050 decarbonization goals, disclosure of climate-related risks, carbon emissions, and impact will matter for everyone — including those at the earliest stages of business building.”

What is the Venture Climate Alliance (VCA) and Who are the Members?

Venture capital investors have a big role in shaping the pathways to net zero emissions across sectors and industries. The Venture Climate Alliance is founded by a group of leading VCs aiming to achieve a rapid transition to net zero emissions by 2050 or earlier. 

VCA members will work together to achieve net zero emissions for the group’s own operations by 2030 or sooner. As part of the alliance, VCs can share common best practices for gathering, interpreting and reporting climate impact data. 

The alliance will also encourage their portfolio firms to have their own net zero targets. Collectively, they will build climate-aligned businesses for “net zero from day zero”.

The 23 VCs involved represent a total of $62.3 billion in assets, with their portfolios range from below $50 million to over $50 billion. The group’s members are the following:

Prelude Ventures 
Capricorn Investment Group
DCVC
Energy Impact Partners
Galvanize Climate Solutions
S2G Ventures
Union Square Ventures
Tiger Global 
World Fund
2150

Other Members:

Obvious Ventures
Congruent Ventures
Valo Ventures
Clean Energy Ventures
Fifth Wall
Overture Ventures
Blackhorn Ventures
Spring Lane Capital
Azolla Ventures
Systemiq Capital
The Westly Group
Innovation Endeavors
ReGen Ventures

VC Funding Climate Tech is Soaring Up

In the past years, momentum across venture-backed climate tech innovations is building up. According to HolonIQ, climate tech VC funding reached over $70 billion in 2022

Several factors are at play but most significantly, supportive policies such as the US Inflation Reduction Act and the EU Green Deal Industrial Plan are driving more innovations.  

As the bridge between capital markets and startups, VC investors are critical in helping companies develop, commercialize, and scale up. 

The VCA provides a platform through which member VCs can develop tools and offer guidance to help tear up barriers in aligning early-stage investments with net zero goals.

The alliance is officially a part of the United Nations’ Race to Zero campaign, an initiative rallying to bring businesses to a zero-carbon economy. It is under the leadership of the UN Climate Change High-Level Champions. 

Moreover, the VCA will be operating under the Glasgow Financial Alliance for Net Zero (GFANZ), co-led by former Bank of England governor Mark Carney. GFANZ brings together larger companies aiming to cut emissions to levels that the natural or technological carbon sinks can absorb. 

The VCA will join others belonging to GFANZ’ “sector-specific alliance” to create methodologies and tools for early-stage investments while sharing expertise across the wider financial sector.

The 4 Commitments Guiding the VCA

Guiding the VCA’s operations are the members four commitments – commit, recruit, assist and track. 

Commit:

Committing to the alliance means a VC firm must do an internal inventory of its emissions from all sources – Scopes 1, 2, and 3. Then it pledges to reach net zero or negative emissions for its operations by 2030 or sooner.

Recruit:

Portfolio companies will be encouraged to set their own net zero targets by 2050 or earlier. VCA provides tools and support to each company, while leveraging existing methodologies and guidance like those of the GFANZ.

Assist:

When a portfolio company has a net zero target in place, VCA will provide stage-appropriate assistance to achieve those goals. The alliance assistance comes in different ways, e.g. serving as adviser or shareholder and giving support in policy development. 

Track:

The alliance will monitor and share progress toward net zero targets. Though detailed emissions data per portfolio company may not be available all the time, a 3rd-party body will report on how that company progresses in its goals.  

Project Frame for Net Zero Methodology

Putting together a pack of VC firms is just the first step for the Venture Climate Alliance. The next step for the investors is to develop a methodology to guide their emission reductions activities, accounting and reporting.  

VCA members have been consulting one of their strategic partners, Project Frame which is an initiative of the nonprofit Prime Coalition. Project Frame develops emissions-impact methodologies and reporting standards for climate-driven investors. The image below is an example of the initiative’s methodology differentiating potential and planned impact. 

Project Frame Pre-Investment Considerations Methodology

Source: Project Frame

A potential impact is a top-down approach which estimates what a net zero solution can achieve. Whereas a planned impact is a bottom-up approach of calculating the solution’s achievement based on a realistic analysis of its business model. 

The VCA and Project Frame will work together to develop a way for the alliance’s members to quantify their emissions. It will also help them determine how to reduce their footprint over time. This strategy includes the role of carbon credits as emissions offsets to help ensure that VCs portfolios reach net zero. 

Carbon credits give the holder the right to emit a corresponding amount of carbon. Each credit represents one ton of CO2 reduced, avoided or removed. 

Membership in the VCA is open to any venture capital firm, or a division of a larger firm engaged primarily in venture investing. To be part of the alliance, a firm agrees to fulfill the VCA’s four commitments and to actively contribute to the group where appropriate. 

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