Ontario Teachers’ Invests Billions to go Net Zero

The Ontario Teachers’ Pension Plan (OTPP) continues to look for positive environmental impacts of their investments.

The Fund’s recent climate report shows great progress on its net zero by 2050 plan. The Chief Investment Officer, Ziad Hindo said:

“We are increasingly evolving our thinking to consider how we can use our capital in a way that has clear and measurable real-world environmental and social benefits while creating value for our members.”

Indeed, one of the world’s biggest pension funds has been making huge strides on its net zero targets.

To date, OTPP delivers retirement security to 333,000 members and pensioners, invests in 50+ countries worldwide, and manages C$242.5 billion in net assets (as of June 30, 2022). 80% of those assets are managed in-house.

Ontario Teachers’ Net Zero Pathway Progress

Ontario Teachers’ has put 2025 and 2030 targets in place to cut its carbon emissions to reach net zero investment activity by 2050.

OTPP aims to reduce portfolio carbon emissions intensity by 45% by 2025 and 67% by 2030, compared to its 2019 baseline. These emission reduction targets cover all the Fund’s assets, resources, and holdings.

Also, OTPP has an ambitious plan to achieve $300B in net assets by 2030 and $50B in green investments by 2050.

Since their net zero 2050 announcement last year, Ontario Teachers’ saw a significant drop in their emissions due to its investment shift from passive to active exposure.

Currently, the Fund’s private assets that represent 72% of its PCF (portfolio carbon footprint) holdings continue to achieve lower emissions intensity than other asset classes. Its wholly owned subsidiary Cadillac Fairview, for instance, has been taking actions that further reduce carbon emissions.

2021 Key Highlights

The following table shows Ontario Teachers’ progress in cutting its PCF as of 2021.

While here’s the sector-based carbon footprint contribution of the Fund.

Regarding other performance metrics, Ontario Teachers’ achieved the following results.

The annual total fund net return has been 9.7% since the pension plan started in 1990.

The Fund’s Climate Strategy

Ontario Teachers’ climate strategy reflects its commitment to reducing the environmental impact of its portfolio. Its decarbonizing strategies also capitalize on opportunities supporting the transition to a net zero future.

Decarbonizing portfolio:

The Fund calls its net zero by 2050 plan “PART” short for Paris Aligned Reduction Target. One key element of the PART is decarbonizing OTPP portfolio companies. And so in 2021, Ontario Teachers’ set a target to align net zero goals of companies with significant stakes.

By providing resources to and working closely with its portfolio companies, they’ve made progress with PART by creating a “decarbonization playbook”. It’s a guidance for portfolio companies detailing:

The case for change, including board and management education
Carbon footprint baseline development
Decarbonization levers identification and assessment
Target setting, validation, and communication
Guidance on what a credible net-zero plan entails

They’re now engaging the first wave of select portfolio companies to implement the decarbonization playbook. By prioritizing those firms, it helps OTPP to focus its efforts on the highest-emitting companies where they influence emissions.

Decarbonizing high-emitters:

Part of this strategy is to make an initial investment of about $5 billion over the next few years toward “High Carbon Transition (HCT) assets”.

High Carbon Transition assets are very high-emitting companies with credible decarbonization plans that Ontario Teachers’ can accelerate via their capital and expertise.

To support the transition of select HCT assets, their approach will include:

Clear investment criteria. HCT assets as businesses with significant carbon intensity. That means ~10x the average of the Fund’s portfolio carbon footprint, or around 300 tCO2e/CAD MM.
Initial allocation of $5 billion to HCT assets.
Enhanced transparency.
Maintaining targets and commitment to net zero.

Increasing green investments:

In 2021, OTPP reached ~$33 billion in green investments. These include investments in low-carbon transportation fuel and carbon credits.

In December last year, Ontario Teachers’ invested $250M in Sydney-based carbon credits developer, GreenCollar. The generated carbon credits are sold by GreenCollar to first and secondary markets.

OTPP invested in GreenCollar because they see the positive impact of its carbon credit projects that align with their long-term return goals.

To date, the developer produced +126 million Australian Carbon Credit Units and prevented 30,000+ kg of nitrogen from entering the ocean.

Interests in environmental programs such as ESG investing are growing fast and carbon credits have been the focus of these investments. In fact, industry estimates expect to see carbon markets hitting $22 trillion by 2050.

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Debt-for-Nature Swaps Are Drawing Attention, Carbon Credits Play A Role

Debt-for-nature swaps or debt-for-climate swaps are now getting more attention from the world’s developing countries who have around $500 billion of debt servicing payments.

According to the Nature Conservancy, debt restructurings tied to nature or climate-friendly outcomes present a multi-billion-dollar possibility.

While the instruments have been around since the 1980s, they start to gain more traction once again following the deals made by the Nature Conservancy.

The recent debt crises for developing nations due to COVID-19 pandemic, Russia’s invasion of Ukraine, and rising interest rates also prompted climate swaps to resurface.

What are Debt-for-Nature or Climate Swaps?

The vital role of forests in capturing and storing carbon dioxide has attracted renewed interest in debt-for-nature swaps.

They are deals that allow a country to restructure its debt at a lower interest rate or for longer repayment periods. And that’s in exchange for the debtor’s commitment to fund conservation or climate-related projects.

Debt-for-climate swaps usually involve countries that are financially distressed or have difficulties in repaying their foreign debts. The proceeds through the swaps go to conservation or green projects managed by local environmental trust funds.

The lenders can be developed country governments, commercial banks, or even private companies. Commercial climate swaps involve selling a commercial bank’s debt on secondary markets at discounted rates.

Bilateral debt swaps involve government debt, known as sovereign debt, and typically need a restructuring plan for the debtor. Here’s how bilateral debt-for-nature swaps work.

A portion of the capital that would have otherwise gone to paying off the original debt is channeled towards pre-agreed investments in conservation projects or implementation of environmental policies.

Debtors benefit by reducing their debt burden and opening fiscal space for dedicated investments in climate projects. They also benefit by decreasing pressures on the exchange rate as their new obligations are in domestic currency.

As for creditors, the lending developed countries that are parties to the United Nations Framework Convention on Climate Change (UNFCCC) benefit by accounting the climate swaps toward their commitment to provide $100 billion per year in climate finance to developing countries.

The Market for Debt-for-Climate Swaps

58 of the world’s developing countries most vulnerable to climate change collectively have around half a trillion of debt servicing payments due in the next 4 years. An adviser from a coalition representing those nations said in an interview that:

“This huge debt service payment could obstruct opportunities to invest in adaptation or the low-carbon transition… Debt swaps must scale. We’re just not in a situation where we can have austerity because we need to invest out of the pandemic and invest out of climate impacts.”

Since 2016, the Nature Conservancy has organized 3 debt-for-nature swaps involving the Seychelles, Belize and Barbados. For these deals, the organization was able to convert over $500 million of debt into $230 million of money for conservation.

Previous examples of bilateral debt-for-nature swaps from Latin America are as follows:

During a panel discussion at the COP27 climate summit, Jennifer Morris, CEO of Nature Conservancy, said that:

“The opportunity for conservation here is huge… We see $10 billion right now of opportunity that can turn $2 billion into conservation, with not one penny of new philanthropy coming from the private sector.”

But the market for climate swaps is a niche due to its high transaction costs. Plus, there’s a need to monitor climate projects as well as the need for the debtor to make a long-term commitment to the scheme.

What’s even more remarkable is that the world’s biggest bilateral creditor, China, hasn’t been a part of these swaps substantially. Still, there’s growing interest from the developing nations recently.

For instance, Gabon revealed plans last month for a $700 million debt swap to fund marine conservation. This could be the largest transaction to date.

The island nation of Cabo Verde also plans to do a debt-for-climate swap.

Last year, Argentina committed to linking a portion of its foreign debt to investments in green infrastructure. This year, the president of Colombia suggested a debt-for-nature swap to protect its Amazon rainforest.

And most recently at the COP27 summit, several developing countries also expressed interest in supporting this kind of climate financing. These include statements from Gambia, Sri Lanka, Pakistan, and Kenya.

The Role of Carbon Credits in Climate Swaps

Countries most vulnerable to climate change face many problems as they need to spend more to improve resilience and reconstruction and also have a higher cost of capital.

This is where climate swaps become crucial by offering those countries the chance to still make necessary climate investments. And carbon credits can be part of the swaps, according to the director, wherein investment from the private sector is the key to debt restructuring.

But this can be challenging because the private sector can’t relabel the debt as development assistance. The use of carbon credits addresses this by providing incentives for private stakeholders.

And with the surge of corporate net zero pledges, the use of carbon offset credits is also growing. They can make use of the swaps and link them to their ESG and sustainable financing schemes.

Private holders of sovereign bonds can get the offset credits in exchange for a debt-for-nature swap or restructuring. These credits are from nature-based and other emissions reduction projects.

International climate bodies are currently investigating climate swaps in the context of programs to support a greener and sustainable economy.

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Bloomberg to Form Global Carbon Trust to Scale the VCM

On the first day of the COP27, Michael Bloomberg’s charitable organization and Three Cairns Group revealed plans to form the Global Carbon Trust (GCT) to help scale up the voluntary carbon market (VCM).

Three Cairns Group is a mission-driven investment and philanthropic firm. It seeks to build and support innovative platforms and initiatives to speed up climate action.

Bloomberg Philanthropies invests in five key areas to ensure better, longer lives and create lasting change, including arts, education, public health, government innovation, and the environment. Its fund includes all of Michael Bloomberg’s charitable givings.

The two firms will establish the GCT and the Carbon Storage Governing Council (Governing Council). The initiative will provide governance, boost the supply of projects, and promote standardized financial contracts to attract market participants.

The Global Carbon Trust aims to drive innovation, transparency, and scale the carbon markets.

Global Carbon Trust Supplementing the VCM

To help bring the world to a 1.5°C pathway, the VCM has to grow by 15x to 1.5-2 GT of carbon credits per year by 2030. And at maximum, by 100x to 7 to 13 GT per year by 2050, according to the Taskforce for Scaling the Voluntary Carbon Market.

The chart below shows the potential voluntary demand scenarios in 2030 and 2050.

There has been significant progress made by the private sector in improving governing principles, standards, and quality of carbon credits. But the VCM still lacks enough infrastructure that underpins traditional financial markets like standardized, incentive-based contracts.

There are a lot of potential buyers of carbon credits as part of their net zero pathways. But some of them hesitate to participate in the market because of these reasons:

Lack of standardized contracts
Inability to depend on carbon removal and storage projects in the long-term
Absence of well-capitalized intermediaries between buyers and sellers

Add to this the concern about carbon credit verification delays that is costing project developers $2.6 billion. This also limits the innovations essential to enable sellers to bring supplies of high-quality carbon credits to the VCM.

This is where the Global Carbon Trust comes in to supplement the current state of the VCM. The initiative will offer an effective means to manage the supply and liquidity of carbon credits.

Mark Gallogly, Co-founder of Three Cairns Group, said:

“…To reach its potential, the VCM will need greater rigor, data, transparency, ongoing measurement, and capital. The mission of the GCT is to augment and improve existing carbon markets and enable the VCM to scale to its needed size.”

Michael R. Bloomberg, Founder of Bloomberg Philanthropies, also noted that an efficient VCM is crucial in fighting climate change. It offers a powerful way to pump more money into projects that cut emissions. He further added:

“…Turning climate commitments into smart investments that make a real difference requires transparency, accountability, and reliable data, all of which the Global Carbon Trust will help bring to carbon markets.”

The Carbon Storage Governing Council

The Governing Council will work with the GCT. Representatives to the council are from academia, industry experts, and civil society.

As one of the working groups, the council will aid GCT in performing its tasks in scaling up the market. With its establishment, the organization can achieve its initial focus. This includes the development of fixed-term contracts and carbon credit projects.

The Global Carbon Trust will also build on key elements of the VCM. These include boosting revenue from carbon storage to help fund projects with other benefits, not just emission reductions.

Through the GCT, private institutions, carbon registries and verifiers, brokers, and exchanges will all continue to play their vital roles in the functioning of the VCMs.

Key Functions of the GCT

Through the following functions, the Global Carbon Trust hopes to be a source for transparent carbon market data.

Addressing the need for fungible carbon credits:
The GCT will address the need for term-limited, fungible carbon credits backed by enforceable contracts. This will help the VCM capitalize in the urgency of delivering climate action and aligning financial incentives with climate targets.
Creating standardized carbon credit contracts:
The GCT will create standardized contracts for carbon credits as well as embed third party monitoring and verification of project performance. It will also develop arbitration and compensation processes for credits that fail to meet targets.
Increasing supply of carbon credits:
The GCT will boost supply of credits including those from emerging economies by reducing barriers to entry. It will do this by bolstering innovation and enhancing the capacity for long-term carbon removal and storage.

With the above tasks, the GCT aims to minimize greenwashing, mitigate risks, and improve market credibility.

Three Cairns Group and Bloomberg Philanthropies look forward to engaging with various parties inside and outside the COP27 summit as they establish the GCT and the Governing Council.

Both initiatives will start working in the coming months, with more updates expected in 2023.

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Carbon Credits Take Center Stage at COP27, $580B for “Loss & Damage”

As world leaders gather at the COP27 summit in Sharm el Sheikh, Egypt, carbon credits take center stage as well as the push for the ‘loss and damage’ compensation from the largest polluters.

At the same time, the International Monetary Fund (IMF) chief says a $75/ton carbon price is a must by 2030.

As the latest climate change conference is happening this week, concerns about tackling the catastrophic effects of global warming have never been more urgent during COP27.

And as nations meet to address climate change, the U.S. aims to reassert its global leadership by working on a plan to develop a new framework for carbon credits.

Another critical question on the agenda is whether rich nations will pay for climate-related losses and damage.

U.S.’ New Framework for Carbon Credits

The U.S. plans to pool money from the world’s largest companies to help developing countries stop using fossil fuels. This would be under a new framework for carbon credits which proceeds will fund new clean energy projects.

Under this plan, state bodies can earn carbon credits by reducing their power sector’s emissions if they cut their use of fossil fuels and increase renewable energy use instead.

There will be an independent, accreditation body, which remains unspecified yet, that will certify the credits. Entities can then buy those credits to offset their emissions.

The scheme is considered a power-sector version of the so-called Lowering Emissions by Accelerating Forest Finance (LEAF) venture launched at last year’s COP26. Big corporations will back up the plan such as Nestlé, Amazon, and BCG. The credits will be from avoiding deforestation in countries like Brazil and Indonesia.

US president Joe Biden’s climate envoy John Kerry is to unveil this plan at the COP27 where over 110 heads of state are present.

Though it’s voluntary, the scheme will give the biggest polluters a means to address their footprint, according to Kerry. And so, it can entice participation from the private sector.

U.S. officials hope the plan will unlock ‘tens of billions’ of cash to fund the energy transition and said they would ensure the environmental integrity of the carbon credits.

Apart from the U.S., other world leaders are also racing to fund the shift to clean energy and reduce developing countries’ reliance on fossil fuels.

For instance, Mike Bloomberg, a billionaire special U.N. envoy on climate change, revealed a new initiative to help developing countries phase out coal by 2040.

Meanwhile, environmental activists at COP27 are calling for a “fossil fuel nonproliferation treaty.” They’re asking governments to promise an end to all new oil, gas, and coal projects. But such a “treaty” to end fossil fuel use is not on the agenda at the conference.

But there’s another big issue on COP27’s agenda for the first time – compensation for the “loss and damage”. That will be paid by the world’s largest polluters to the most climate vulnerable nations.

COP27 Agenda: “Loss and Damage”

Loss and damage refer to the concept wherein rich countries, who emit the most greenhouse gasses, should pay poorer nations that suffer the most from climate disasters.

Loss refers to economic impacts that are harder to quantify. For example, lost agricultural production due to extreme drought or rising sea levels flooding fields.

Damage, which means the destruction of homes, roads, bridges, and other infrastructures, is easier to calculate.

The funding needed to compensate for the loss and damage varies.

According to a study, it’s worth up to $580 billion annually by 2030, increasing to $1.7 trillion by 2050. The money differs from the funds to help poor nations adapt to climate change.

Asking for loss and damage compensation is not new. It was first championed by nations in the Pacific Ocean and then embraced by other developing countries. And real losses and damages keep on piling up.

Then came record flooding in Pakistan last month, which the World Bank estimated to incur economic losses worth $30 billion.

At this year’s COP27, “funding arrangements” for loss and damage were part of the formal agenda that overcame long-standing objections from the U.S. and the E.U.

The biggest debate at the summit will be over whether to create a dedicated financial mechanism for loss and damage. Or clarity on whether funds might come from new or existing sources.

While this agenda is a hot topic, talk about carbon pricing is also on the sidelines of the COP27 discussion.

IMF Managing Director Kristalina Georgieva said:

“Unless we price carbon predictably on a trajectory that gets us at least to [a] $75 average price per ton of carbon in 2030, we simply don’t create the incentive for businesses and consumers to shift…”

The problem is that the acceptance of pricing carbon is still low in many countries, as per Georgieva. The EU may already price carbon above that level, but other regions like California have much lower carbon prices under $30/ton. While some regions don’t even price pollution at all.

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Ex-Oil Exec’s form ZeroSix to Turn Oil & Gas Reserves Into Carbon Credits

Veterans from Shell and other oil majors have launched ZeroSix, which plans to tackle 1 gigatonne of carbon emissions from oil & gas wells and generate carbon credits.

ZeroSix offers a digital platform for a new era of high-quality carbon credits addressing accuracy, additionality, permanence, and transparency in the voluntary carbon market (VCM).

The company will convert unextracted, unburned oil and gas into protected carbon credits.

The new greentech venture will create, track, trade, and retire carbon credits on a decentralized digital platform.

This unique approach introduces a revolutionary kind of carbon credit. That’s an upstream carbon offset from fossil fuels that never burn while incentivizing oil and gas producers to shut their wells early.

ZeroSix Carbon Credit Solution

According to Greenpeace, “carbon stored in trees or other ecosystems is not the same as fossil carbon left underground.” And of global GHG emissions are from fossil fuels.

So, a team of energy and digital technology professionals from the oil and gas sector and sustainability initiatives, form ZeroSix to provide a solution that keeps fossil fuel reserves in the ground. The founders include Shell and other oil majors veterans.

As per ZeroSix’ CEO, Martijn Dekker:

“We believe the voluntary carbon market can be a critical driver of fossil fuel emissions reductions. But the market must improve in size, quality, and transparency to ensure carbon offsets are actually an effective tool. ZeroSix will contribute to all three areas of growth and improvement as we work to bring the world closer to net-zero.”

In the U.S. there were over 930,000 hydrocarbon-producing wells in 2020. And about 870,000 of them produced less than 100 barrels of oil a day (bottom-quartile).

Those wells with the lowest production contribute only 0.2% of oil and 0.4% of gas. But they account for a disproportionate 11% of annual methane emissions from all U.S. oil and gas production. This translates to 280,000 tonnes of methane per year.

For ZeroSix, that fact offers a huge opportunity for both an economic and a climate win.

The firm states in its analysis that in the U.S., early retirement of bottom-quartile wells can avoid 1 GT CO2e per year. That’s even more than the annual GHG emissions of Germany, the world’s 4th-largest economy.

To address the problem, ZeroSix creates a financial incentive for producers to “mine” their reserves differently. That’s by permanently protecting their wells from extraction via a new zero-carbon fossil fuel value chain.

The company calls it a new era of fossil fuel “prospecting” that leaves fossil fuel reserves unextracted and unburned. And that generates high-integrity carbon credits via ZeroSix platform.

How ZeroSix Platform Works

The new platform offers a robust digital solution to mint, sell, buy, hold, transfer, and retire ZeroSix token-based carbon credits. This solution involves two main users: project owners and token buyers.

Project owners refer to entities that produce the carbon credits. Token buyers are firms, individuals, and other entities looking to offset their emissions.

The solution follows a blockchain-based approach and other decentralized digital technologies. The system uses a ZeroSix token: 1 token = one tonne CO2e.

ZeroSix tokenized system provides a shared, immutable, tamper-proof digital record of events and transactions related to the creation, sale, and retirement of carbon credits.

The token uses the ERC-1155 multi-token standard. That means it includes both non-fungible (information that is unique and specific to a token) and fungible (information that is uniform across all tokens) components. This standard is the same approach adopted for digitalized renewable energy markets.

Following the stringent ZeroSix protocol, fossil fuel wells are shut-in forever. The forfeited reserves convert to carbon credits that can be used in the VCM. This solution fixes the four weak areas that put carbon credits under scrutiny:

Accuracy: ZeroSix carbon credits are based on government regulatory standards (SEC standard) in calculating hydrocarbon reserves emissions for precise measurements and reporting.

Additionality: Keeping oil and gas reserves from proven producing wells in the ground avoids all emissions related to their potential surfacing, processing, and consumption. ZeroSix carbon credits are only issued for those wells which would have otherwise resulted in extracting, refining, and burning of the oil or gas.

Permanence: ZeroSix carbon credits require that the fossil fuel reserves are never extracted, with insurance against event of reversals. The shutting in of oil and gas wells is irreversible.

Transparency: The decentralized, digital platform used by ZeroSix allows anyone to easily verify carbon credits, which are independently verifiable.

ZeroSix’s operating system will launch at the end of 2022 while aiming for a full carbon credit platform launch in 2023.

The company also plans to scale to take on other emissions reduction projects apart from oil and gas. These include other hydrocarbons and CO2 removal technologies such as direct air capture.

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$1.8 Billion Bet on the Carbon Markets

A consortium led by Oak Hill Advisors bought 1.7 million acres of hardwood timberland for $1.8 billion to reduce logging and boost forest carbon deals.

Oak Hill Advisors, made one of the largest timberland purchases in the U.S. Oak Hill is a subsidiary of T. Rowe Price Group Inc. They can tap into the $57 billion of assets under management to get the $1.8 billion for 1.7 million acres of forest it bought from The Forestland Group (TFG).

Oak Hill Acquiring TFG for Forest Carbon

The Forestland Group manages natural forests to deliver financial returns, climate mitigation, and ecological impact. It’s a liquidating investment firm that raised funds from endowments, rich individuals, and other investors.

TFG bought the timberland from families and small mills, reaching 2.3 million acres of forestland. Out of that, 1.7 million acres now go to Oak Hill.

The group’s strategy in managing forests differs from its rival investors. Instead of focusing on monoculture timber or crop plantations, TFG opted to focus on regenerating forests naturally.

Their 56 properties are mainly hardwood forests. They range from Michigan’s Upper Peninsula down to Louisiana’s Atchafalaya Basin, over to the Apalachicola River in Florida, and up to New York’s Adirondack Mountains.

Those properties span 17 states in the eastern region, which will be under the management of Anew Climate LLC’s subsidiary Bluesource Sustainable Forests.

Oak Hill partnered with Anew to learn how much carbon the trees can store. That’s in preparation for the firm’s acquisition of TFG and takeover of its timberland management.

The acquired forestland from TFG and previous purchase of 100,000 acres more made the investment firm one of the ten largest timberland owners in the U.S. And among them, Oak Hill Advisors is the only one focusing on forest carbon markets. The rest are busy supplying the timber and pulp mills.

Managing Oak Hills’ forest carbon deals rests on Anew which seeks to reduce logging. In fact, Anew aims to earn only 10% – 20% from wood harvests. Whereas 80% – 90% has been the previous owner’s (TFG) targets.

According to the Anew unit head, Jamie Houston:

“We’re really going to be focused on forest health. We’re thinking about this in decades, not years.”

Trailing the Carbon Offset Market Growth

While timber firms are busy cutting down trees, other businesses are also looking for ways to cut down their carbon emissions. This led to the forest carbon credit market boon.

Forest carbon credits or offsets are meant to incentivize timberland owners to log less for trees to continue storing carbon. Entities can then buy and use those credits to offset their emissions under regulation.

But apart from regulated emissions under the so-called cap-and-trade system, forest carbon credits are also popular in the voluntary carbon market (VCM).

In the VCM, companies can voluntarily use the offsets in their carbon accounting. Prices for carbon offsets vary, depending on types and terms.

As per the Bank of Montreal (BMO) estimates, the VCM has the potential to grow 6.5x by 2030 ($50 billion). By 2050, its growth would be 17.4x relative to 2020 volume. This growth will be likely driven by companies in need of offsets as part of their climate goals.

Forestland owners have a big role to play in creating carbon credits, which are priced higher in the market than other offsets.

While some timberland owners are eager to produce forest carbon credits, Oak Hill and Anew say they’re not in a hurry. They prefer to let more carbon sinks into the trees as the market matures.

Anew’s Plan For Forest Management

Anew is one of the top providers of offset credits from improved forest management, carbon capture, and other projects.

In the coming winter season, Anew plans to dispatch foresters to get baseline volumes of biomass carbon storage. It will be the basis of measuring carbon captured by the trees.

For instance, one forester has been using a laser hypsometer to measure trees in woodlands.

Anew will allow the forest understory – the layer of shrubs, small trees, and vines between forest floor and canopy – to grow.

One reason for this strategy, according to the former TFG president who now joined Oak Hill, is that:

“…there was less competition to buy slow-growing deciduous forests that supply wood for furniture, flooring and cabinetry than for the stands of softwood, such as pine, that are harvested to make lumber and mashed into pulp for delivery boxes and coffee cups…”

Anew is reducing wood harvests and seeks to promote the growth of all the trees, not only those that mills value. In a sense, what would be wasted in a typical harvest has value in forest carbon credit markets. And that includes holly bushes, a towering beech, and a black cherry bent.

Oak Hill initially aimed to buy $500 million of timberland. But it was able to convince more investors to buy all of TFG’s holdings. And so, there are over 150 foresters dispatched to size up each property.

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Salesforce Strengthens Climate Commitment with 3 New Initiatives

Salesforce is set to launch three new initiatives at the COP27 next week in Egypt, deepening its climate commitment while boosting efforts to promote climate solutions. 

Salesforce has been showing its commitment to climate action for more than a decade now. 

In 2021, the global leader in CRM attained net zero residual emissions. And just over a month ago, it launched its own carbon credit marketplace called the Net Zero Marketplace. It’s a market platform connecting ecopreneurs and buyers of carbon credits and helping firms hasten climate action. 

During critical climate moments like the 2022 United Nations Climate Change Conference (COP27), Salesforce strengthens its sustainability agenda by committing more funds and resources to help achieve a 1.5°C future. 

Here are the 3 environmental initiatives where Salesforce’s climate actions will focus on. The San Francisco-based CRM company also revealed its new Nature Policy Priorities that protect natural ecosystems.  

Initiative #1: The Blue Carbon Framework 

The global voluntary carbon market (VCM) is forecasted to grow to $50 billion USD by 2030 as firms strive to reach net zero emissions. Blue carbon is especially seeing a rapid demand growth. 

Blue carbon is the carbon captured and sequestered by coastal and marine ecosystems such as seagrass meadows and mangroves. 

Along with a global coalition of ocean leaders, Salesforce will unveil its “High Quality Blue Carbon Principles and Guidance”. It’s a blue carbon framework drafted to ensure that blue carbon credits maximize results for the climate, the people, and biodiversity. 

The framework’s principles will serve as safeguards in developing and managing blue carbon projects, making sure they’re equitable, fair, and credible.

The WEF Friends of Ocean Action, the Ocean Risk and Resilience Action Alliance (ORRAA), The Nature Conservancy, and Conservation International, and Salesforce laid out the groundwork for the framework. It also includes input from various public stakeholders.

The Director of Ocean Sustainability of Salesforce, Whitney Johnston, noted that:

“This [the framework] is only the beginning of a shared journey to ensure accountability, sustainability, and transparency in the rapidly evolving blue carbon marketplace.” 

Initiative #2: The Nature Accelerator 

Salesforce is launching another initiative called Nature Accelerator. It will give nonprofit organizations the capital they need to pursue innovative ideas and scale climate actions. 

The initiative will pool resources from across the company to help empower those nonprofits. Through it, they will have access to various resources such as philanthropic investments, product donations, and pro bono support.

Through a dedicated Salesforce team, the pilot program will let nonprofits explore nature-based climate solutions. It will also enable them to develop organizational capacity and insights that the broader climate sector can learn from. 

Putting it all together, Senior VP of Philanthropy in Salesforce captured the key purpose of this climate commitment:

“Salesforce’s Nature Accelerator provides nonprofits with funding, technology, and support to make big bets and explore the innovative new solutions our planet needs.” 

Initiative #3: The Eco-Restoration Project in Zambia 

Lastly, the CRM tech company will also announce at COP27 its ecosystem restoration project in Zambia. This is in support of the Global EverGreening Alliance (GEA) to restore and grow 30 million trees across the African nation.

The restoration project is part of climate commitment of Salesforce to conserve, restore, and grow 100 million trees by 2030. 

It’s also part of GEA’s Restore Africa Programme, seeking to scale regenerative farming practices across Africa and bring 100 million hectares of degraded land under restoration by 2030.

As Zambia faces land degradation and poor environmental governance, its natural resources and the rural communities depending on them are suffering. 

Salesforce’s project resolves the issue by restoring ecosystems in the country. It will help reverse the effects of climate change, promote wildlife conservation, and support small farmers in Zambia.

This support from Salesforce will allow GEA to scale up “proven and effective approaches to improve the productivity, profitability, and resilience of food production systems to the impacts of climate change.”

The firm also has supported similar nature-based projects globally, in Australia, Latin America and Europe.

Salesforce Nature Policy Priorities

In addition to the above climate action, Salesforce recently revealed its new Nature Policy Priorities to guide its advocacy and policy engagement to protect natural ecosystems. The priorities nest under the firm’s corporate Climate Policy Principles.

Salesforce will perform three major actions under this climate commitment:

Promote strong global, national, and regional policies to prevent, halt, and reverse nature loss and degradation. 
Advocate for increased fair and equitable investments into nature-based solutions.
Support and recognize local communities and Indigenous peoples as leaders for conservation and restoration.

As part of these priorities, Salesforce participated in the Business for Nature and the Taskforce on Nature-related Financial Disclosures (TNFD) to call on organizations to assess and disclose their nature-related dependencies by 2030.

All these initiatives are part of broader leadership of Salesforce on global climate commitment. The company will also share the details of these new undertakings at the COP27.

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Electric Planes Are Now Taking Off: The Case of Heart Aerospace

Swedish startup Heart Aerospace is developing a next-generation solution to aviation carbon emissions with their new 30-seater electric plane.

Gothenburg-based Heart Aerospace is an electric airplane maker with the mission “to create the world’s greenest, most affordable, and most accessible form of transport”.

The company seeks to make electric air travel the new normal for regional flights. With the cost of electric planes dropping it will soon start to compete with traditional aircrafts as the industry evolves.

Electrifying Regional Air Travels

Airlines – and the aviation industry as a whole – have come under fire for their air pollution. By some estimates, air travel is accountable for 3% to 4% of all GHG emissions in the U.S.

The industry even has its own carbon credit scheme CORSIA.

Globally, the International Air Transport Association (IATA) forecasted the following scenario by 2050 for global aviation emissions.

Though airlines have different ways to address their emissions, electrifying air travel is one solution to reduce the sector’s climate impact. And while some experts say that commercial operation is still far down the line, electric or battery-powered planes are gaining more traction.

Introducing Heart Aerospace’s Electric Plane

Founded in 2018, Heart Aerospace has been developing a regional electric-hybrid plane named ES-30. It has a standard seating capacity of 30 passengers driven by electric motors with battery-derived power. It’s the manufacturer’s second prototype, after its 19-seater ES-19.

The ES-30 will have a fully electric zero emissions flight range of 200 kilometers. It also has an extended range of 400 km for 30 travelers. Better yet, it can fly up to 800 km with 25 passengers which includes typical airline reserves.

The ES-30 also flies more quietly than conventional airplanes for its fewer moving parts.

All these features combine with the possibility of decreasing costs due to lower fuel cost and maintenance. This will enable airline operators to offer new routes that were not viable before and bolster regional air travel.

The upgraded aircraft will be in full service in 2028.

Heart Aerospace’s founder and CEO, Anders Forslund, remarked that:

“We have designed a cost efficient airplane that allows airlines to deliver good service on a wide range of routes.. With the ES-30 we can start cutting emissions from air travel well before the end of this decade and the response from the market has been fantastic.”

He also noted that used to be hundreds of small planes serving a lot of communities that have now lost service. Small city residents prefer more to drive on trips of 250 miles rather than take a plane.

In fact, less than 1% of travelers making a 250-mile trip choose to fly as per estimates. That’s because jet engines made for planes were too expensive today to serve them profitably, according to Forslund.

With that said, an executive from the United Airlines pointed out that a small city will either get service they didn’t have before or they’ll have a greater frequency of service. This will allow travelers from smaller cities to fly in and out on the same day, which was not possible with traditional jet powered planes.

In particular, some estimates suggest that an electric plane can have a 90% reduction in fuel costs and 50% lower maintenance than a fossil fuel-powered plane.

These decreased costs will be a big plus to the $26 billion short-haul air travel market, consisting ~30% of all flights. In effect, there will be more service between smaller regional airports that are uneconomical right now.

Add to this the 66% quieter movements and zero tailpipe emissions of electric planes. Hence, the likes of ES-30 will be cheaper to run than traditional jet engines within a decade as the industry evolves, experts say.

With such a revolutionary electric aircraft design, ES-30 draws a lot of attention and money.

Who’s Dipping Their Wings Into Electric Planes?

Heart Aerospace is not only attracting some of the world’s largest investors such as the Breakthrough Energy Ventures, EQT Ventures, European Investment Council, and Lower Carbon Capital. The electric plane maker has also won the trust of major industry players around the world, including:

Mesa Air Group Inc.,
United Airlines,
Air Canada, and
Swedish aerospace and defense company Saab

Last September, both Air Canada and Saab confirmed holding minority stakes in Heart Aerospace. Each company invested US$5 million in the startup.

The North America’s largest airlines also placed a purchase order for 30 ES-30 units. Air Canada’s President and CEO Michael Rousseau commented that:

“We have been working hard with much success to reduce our footprint, but we know that meeting our net-zero emissions goals will require new technology such as the ES-30. We have every confidence that the team at Heart Aerospace has the expertise to deliver on the ES-30’s promise of a cleaner and greener aviation future.”

United Airlines and Mesa Air Group also placed previous orders for ES-19 units for a total of 200 with an option for an additional 100 planes. But they’re reconfirmed for the updated ES-30 design.

Apart from those commitments, plenty of other holders of Letter of Intent (LOI) for ES-19 have also updated their intent to go for ES-30. They include:

Nordic airlines Braathens Regional Airlines (BRA),
Icelandair
Scandinavian Airlines SAS
New Zealand’s Sounds Air
Swedish-based lessor Rockton

Portuguese airline Sevenair also signed an LOI to buy ES-30s. With this latest interest, Heart Aerospace has a total of 230 orders and 100 options for its electric plane, along with LOIs for 99 planes.

With lower costs and zero carbon emissions, the business case for electric planes with the promise for cleaner aviation seems to be taking off.

The post Electric Planes Are Now Taking Off: The Case of Heart Aerospace appeared first on Carbon Credits.

The Timeline of the COP Conferences Leading to COP27

Following the wake of the Montreal Protocol in 1987 the UN in conjunction with the World Meteorological Organization established the Intergovernmental Panel on Climate Change (IPCC) in 1988.

For a brief history of climate change before this, click here.

The IPCC’s first assessment report, released in 1990, would conclusively assert that human activities were the leading cause of global warming.

This report would set the foundation for the United Nations Conference on Environment and Development (UNCED) in RIO in 1992.

From that event three Conferences of the Parties or COP emerged, focused on desertification, biodiversity, and climate change.

United Nations Convention to Combat Desertification (the UNCCD)
The Convention on Biological Diversity (CBD)
The United Nations Framework Convention on Climate Change (the UNFCCC)

The first international climate change conference COP was held in Berlin in 1995. With 118 parties representing UN member states in attendance.

Among other things, on the agenda for COP1 was a review of the commitments made under the UNFCCC. And one of the first decisions agreed on at the first COP was that prior commitments made under the UNFCCC would not be adequate to combat climate change.

Discussions on what exactly would be adequate would continue at COP2 in Geneva. It was decided that flexible policies for each country would be preferable over a single unified policy. Legally binding mid-term targets would be required as well.

At the same time, the IPCC’s second assessment report was accepted by the parties.

The Kyoto Protocol: COP3 – COP20

COP3 would take place in Kyoto in 1997, and it was there, after extensive negotiations, that the Kyoto Protocol would be implemented.

An extension of the original UNFCCC commitments, the Kyoto Protocol was adopted that same year but wouldn’t come into effect until 2007.

Under the Kyoto Protocol, more economically developed countries would take the lead in limiting their greenhouse gas emissions. This reflected the fact that their higher level of industrialization would have given them historically higher emissions.

At the following meeting, COP4 in Buenos Aires in 1998, final details regarding the Kyoto Protocol were supposed to be resolved. But the remaining issues proved to be too difficult for the parties to agree.

As a result, these negotiations would carry forward into a “Plan of Action” through COP5 in Bonn in 1999 and COP6 in The Hague in 2000.

COP’s Plan of Action

Though this Plan of Action was supposed to be wrapped up by COP6, talks fell through at the conference and had to be continued in a “part 2” COP6 in 2001.

During this second COP6 meeting, which took place after the Bush administration withdrew the United States from the Kyoto Protocol. A number of key agreements were made there, such as those regarding the Clean Development Mechanism (CDM) that the Kyoto Protocol is notable for.

Under the CDM, the private and public sectors of high-income nations have the opportunity to purchase carbon credits from projects in middle and lower-income nations.

Further details regarding the Kyoto Protocol would be finalized at COP7 in Marrakech later that same year. This capped off the Plan of Action that had been established three years earlier at COP4.

COP8 in New Delhi in 2002 and COP9 in Milan in 2003 set some provisions. They require the more economically developed nations to assist developing countries in adapting to climate change through the transfer of technology.

Then came the ten-year anniversary of the climate change conference, the COP10 in Buenos Aires in 2004. It saw another special Plan of Action to continue supporting developing countries.

This was also the first conference where the parties began discussing the next step in their emission reduction efforts past the Kyoto Protocol, which was scheduled to end in 2012.

COP11, held in Montreal in 2005, was where the Kyoto Protocol was finally entered into force for the initial commitment period of 2008-2012.

Another Action Plan was devised. This time, the plan is to extend the Kyoto Protocol beyond its initial end date in 2012. Also, to negotiate even deeper cuts in GHG emissions.

Further refinements to the support for developing countries through processes such as the Clean Development Mechanism were made during COP12 in Nairobi in 2006.

During COP13 at Bali in 2007, a timeline and structure for negotiation of what to do after the expiry of the Kyoto Protocol was laid out through the Bali Action Plan. And a new working group was established to manage said negotiations.

This is the first conference held following the commencement of the Kyoto Protocol. The main issue discussed at COP14 in Poznań in 2008 was for a replacement agreement that would succeed the Protocol.

Going into COP15 at Copenhagen in 2009, the primary aim of all parties in attendance was to hash out an agreement for 2013 onwards.

However, the countries present could not come to an accord. And so, their discussions were continued at the next COP.

COP16 in Cancún saw the establishment of a “Green Climate Fund”. Under this Fund, the wealthier nations were supposed to provide US$100 billion to developing countries each year. The aim is to assist them in mitigating the impact of climate change.

However, agreement for the actual funding of this $100 billion a year was not actually reached.

COP17 in Durban in 2011 marked the beginning of negotiations for what would become the successor to the Kyoto Protocol – the Paris Agreement. It was set to be adopted in 2015 and go into effect after 2020.

Discussion also continued on an extension of the Kyoto Protocol. It covers the period between the end of the initial commitment period in 2013, and the start of the Paris Agreement in 2021.

COP18 took place at Doha in 2012, during the last year of the initial Kyoto Protocol commitment period. Negotiations were successful here to create the Doha Amendment to the Kyoto Protocol. It created a second commitment period from 2012 to 2020.

Unfortunately, a number of major countries such as the U.S., Canada, China, India, Japan, and Russia either did not commit to this second period, or were not subject to emissions reductions under the Protocol. This makes the Doha Amendment somewhat of a stopgap measure.

The next COP, COP19 in Warsaw in 2013, continued discussions regarding the proposed international agreement in 2015. But the talks were marred by a series of walkouts from poorer developing countries. They accused the most industrialized countries of putting too much of the burden on them.

Further groundwork was laid for what would become the Paris Agreement at COP20 in Lima in 2014.

The Paris Agreement: COP21 – COP26+

Discussions that first began at COP17 in Durban would finally conclude at COP21 in Paris in 2015. This COP established what we now know as the Paris Agreement.

The Agreement was ratified by 194 parties – all but four member nations of the UNFCCC. Its primary goal is to limit global warming below 2°C above pre-industrial levels and, ideally, below 1.5°C if possible.

In order to achieve this, global emissions would roughly need to halve by 2030, and be completely net zero by 2050.

The Paris Agreement consists of rolling five-year periods in which each country agrees to a reduction plan. It’s what they referred to as their Nationally Determined Contribution (NDC).

A new NDC must be submitted every five years, and each NDC must be more ambitious than the last.

Set up this way, the Paris Agreement is the “final” international climate change agreement for the foreseeable future. It was also the first one to be legally binding and hence enforceable.

Several countries and even oil majors like Shell facing climate litigation on the grounds of violating the Paris Agreement.

The Paris Agreement entered into force in November 2016. This is when further work on the actual implementation and details of the Agreement would take place at COP22 in Marrakech later that month. Then COP23 was held in Bonn the next year.

Rules governing the implementation of the Paris Agreement were mostly settled at COP24 in Katowice in 2018. One notable exception was Article 6 of the Agreement, the rules covering the establishment and management of an international carbon market.

Discussion over the particulars of Article 6 was the primary focus of COP25 in Madrid in 2019. Yet, the issue went unresolved. Talks were supposed to resume at COP26 in 2020, but the conference was delayed due to the COVID-19 pandemic.

It wouldn’t be until 2021 in Glasgow that the issue of Article 6 of the Paris Agreement would finally be settled at COP26, setting the foundation for an international carbon market.

What to Expect From COP 27 in 2022

Up next on the calendar is COP27. It will take place in Sharm El Sheikh in Egypt from Sunday, November 6 to Friday, November 18.

Usually, there are dozens of topics of discussion at each annual COP. The abbreviated summary provided above highlights just one or two major points of interest from each previous conference. However, there are often several different minor agreements and details addressed at each COP.

Likewise, there are a couple of different things we’ll probably see on the agenda for COP27:

The IPCC’s sixth assessment report was released just earlier this year. And it’s expected that the parties will recognize the report’s results.
There is scheduled to be a “global stocktake” of climate action at COP28 in Dubai next year. The aim is to measure the actual progress made by the Paris Agreement towards combating climate change. The focus will be on results at COP 27, and whether or not countries are actually hitting their targets.
Back at COP16 in Cancún, a Green Climate Fund was established that was supposed to provide $100 billion a year in climate assistance. However, this fund still remains some $17 billion short. And this will likely be addressed once again as it has been regularly since 2010.
“Loss and damage”, or permanent harm caused by climate change is a term that was coined back at COP18 in 2012. An example is sea level rises rendering areas uninhabitable. There’s an expected financial responsibility for the wealthy industrialized nations, who were the primary drivers of climate change in the past, to assist lesser developed nations suffering from loss and damage; but the exact particulars remain unresolved.
There has been the recent bouts of inflation and food/energy shortages. So, expect a further focus on climate finance particularly from developing nations.
Taking all current climate change pledges and NDCs into account, it’s been calculated that global warming will still exceed the 2°C target set by the Paris Agreement. Expect to see further rhetoric revolving around the Paris Agreement’s mechanism of increasing ambition.

All in all, the key themes of COP27 will likely revolve around Implementation and Climate Finance.

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