Oil giant Occidental Petroleum (OXY) and Carbon Engineering (CE) are constructing the world’s largest direct air carbon capture (DAC) plant in the United States’ Permian basin.

Carbon Engineering focuses on the global deployment of megaton-scale DAC technology. The company has been working on capturing CO2 from the air since 2015.

According to Occidental Petroleum CEO Vicki Hollub, their plant will capture up to 500,000 tons of CO2 each year. This plant will be 120x bigger than the other largest DAC facility called Mammoth.

The Swiss startup Climeworks AG runs Mammoth in Iceland. The facility, once finished, will remove around 36,000 tons of CO2 per year. That corresponds to only 0.0001% of the 36 billion tons of CO2 emitted by humans each year.

Largest Carbon Capture Plant & Net Zero

Occidental Petroleum has already made commitments to reach net zero by 2050. In particular, it seeks to negate emissions from customers who burn the oil and gas extracts, also called Scope 3 emissions. This emission makes up as much as 80% of the firm’s total emissions.

But most of the company’s rivals in the U.S. don’t include customer emissions in their climate goals.

In an interview on a recent podcast, OXY’s CEO revealed their plan to focus more on carbon capture and sequestration than exclusive fossil fuel extraction.

The firm realized that establishing the world’s largest carbon capture plant is one way to be part of the energy transition. That’s because using CO2 generated by human activities is a way that Occidental can continue with its incremental oil production.

The Direct Air Capture plant will rely on carbon capture tech to suck in emissions directly from industrial sources or from the air that will be injected underground.

Here’s how the Direct Air Capture process works:

Large businesses that are striving to have climate plans are relying on offsets to include in their carbon accounting. Coming up with net zero plans is just the first part of the process. Achieving them is even more critical.

However, the supply of carbon removal offsets is more limited than the offsets from carbon avoidance projects such as forestry and renewable energy.

The plant will provide cost-effective solutions that hard-to-decarbonize industries can use like offsets and their own emissions reduction programs to help achieve net zero.

Captured CO2 can be safely sequestered deep underground in saline formations. It is also useful in producing hydrocarbons for low-carbon fuels and in products like chemicals and building materials.

OXY and Net Zero Oil

The largest carbon capture plant is also looking forward to the revenue from “net zero oil” it aims to produce. This oil is produced through the process called Enhanced Oil Recovery (EOR) which extracts more oil from reservoirs than other methods.

Net zero oil with EOR means injecting more captured CO2 into oil reservoirs than what’s released during the extraction and burning of the oil.

Currently, Occidental Petroleum is using CO2 emitted by underground mines and not the CO2 removed from the air or direct emissions from industrial plants.

If OXY reaches net zero by 2050, the company aims to have revenue from carbon capture equal to that from Enhanced Oil Recovery.

The ground-breaking ceremony for the world’s largest carbon capture plant is set for November 29, with commercial operations to begin at the end of 2024.

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Among the human-induced carbon footprint by sector, aviation accounts for the least emissions – 2%. It’s less than the shipping sector (3%), cement production (4%), and the iron and steel industry (5%).

Energy industries that generate power or electricity have always been the largest emitter.

But as demand for flights grows, so does aviation’s emissions. This is why all segments of the sector, from manufacturers to airports and airline companies, are working hard to reduce their emissions.

Unfortunately, emissions from international flights are not part of the international climate mechanism established by the United Nations Framework Convention on Climate Change or UNFCCC.

That’s because such footprint doesn’t fall within the scope of nationally-determined climate actions. Rather, those emissions are the responsibility of the International Civil Aviation Organization (ICAO).

So while domestic aviation falls within the UNFCCC, international aviation does not.

The members of ICAO agreed and decided to have a global market-based mechanism for aviation emissions in 2016. This decision gave birth to what we now know as CORSIA.

What is the Meaning of CORSIA?

Airlines are well aware of their role in climate change and have been working hard toward sustainability agenda. In general, they apply the following strategies to manage their environmental impact.

Increased efficiency: examples are more fuel-efficient aircraft and infrastructure improvements
Enhanced cooperation with land transport
Promoting the use of low carbon fuels like SAF – sustainable aviation fuel
Offsetting emissions
Use of hydrogen-powered airplanes before 2050

CORSIA falls under No. 4 – offsetting emissions.

Offsetting is an action by a company or individual to compensate for their emissions by funding a reduction project.

Under CORSIA airlines hope to attain carbon neutrality for international emissions by buying carbon credits, but not all of them use carbon offsets while those who do are not all part of CORSIA.

CORSIA stands for “Carbon Offsetting and Reduction Scheme for International Aviation”. It is the first global market-based solution that airlines can use as a major step to reach net zero emissions by 2050. It first ran in 2021 and will be until 2035.

CORSIA was possible through the consensus among governments, industry, and international organizations. It represents an approach that shifts from national regulatory initiatives to implementing a global scheme.

The standards for CORSIA have been adopted as an Annex to the Chicago Convention. Aviation emissions under it are likely to be implemented by the EU and the UK.

What is the Purpose of CORSIA?

CORSIA seeks to neutralize international aviation CO2 emissions from 2021, at 2019 levels, via offsetting programs. They’re a crucial component of emissions reduction policies at all levels – national, regional, and global.

Offsets have been around for decades and remain an effective mechanism to spur climate action. A lot of offsetting projects bring extra benefits other than cutting aviation footprint that are relevant to sustainable development.

Examples of projects that yield carbon credits or offsets include clean cookstoves, wind, and solar energy generation, forestry, carbon capture, and more. There are a couple of standards that ensure the integrity of the credits generated by those projects.

Which States/Airlines are Part of CORSIA?

Not all airlines participate in CORSIA, but a few of them do.

As of September 2021, 107 states that represent 77% of international aviation activity have done so.

The map below shows which countries volunteered to participate in the initial stages of the offsetting scheme.

By volunteering to join the program, it increases the effectiveness of the scheme by ensuring that more flights are covered. It also enables both airlines and countries to experience carbon trading while the costs are still low.

As more countries join CORSIA, the demand for offsets will grow. This will drive investment in developing countries.

How Does CORSIA Work?

There are three phases involved in this offsetting scheme. Two of them are voluntary, and the third one is mandatory. The voluntary offsetting phase starts in 2021 and lasts until 2026.

At the end of each 3-year compliance period, operators must show that they met the offsetting requirements under the program. They will then start to buy carbon credits from the Aviation Carbon Exchange (ACE).

IATA describes ACE as a “centralized, real-time marketplace that’s brought together with the IATA Clearing House for the settlement of funds on trades in carbon offsets”. It gives aviation stakeholders the avenue to offset their emissions by buying credits in certified projects that avoid or remove carbon emissions.

The number of offsets isn’t measured based on the airline’s emissions. Rather, they’re proportionally calculated on the growth of emissions of the entire industry above the 2019 levels.

Who Does CORSIA Apply to?

The scheme applies only to international flights between states that have volunteered to take part in the first phase. It also applies to airlines that are under CORSIA, requiring them to buy offsets at the end of the 3-year phase.

From 2027, all international flights will be subject to mandatory offsetting requirements. That would represent over 90% of all international aviation activity.

But take note that there are exceptions also, which are flights to and from:

Least Developed Countries (LDCs),
Small Island Developing States (SIDS),
Landlocked Developing Countries (LLDCs), and
states which represent less than 0.5% of international RTKs, unless these States participate on a voluntary basis.

CORSIA’s MRV

An MRV – monitoring, reporting, and verification – is in place to help ensure the integrity of carbon credits under CORSIA.

ICAO adopted detailed requirements for the MRV of emissions as part of the Chicago Convention. The rules are important to see to it that states and airline operators comply with the CORSIA terms.

Uniformity of the MRV requirements for emissions are vital to ensure that operators follow similar terms and promote the scheme’s integrity.

All airline operators with emissions over 10,000 tonnes of CO2 will need to report their emissions to their national authority each year.

These annual emissions reports are then verified by an independent, 3rd-party body before submission to ICAO. This is critical to make sure that data is accurate and verifiable.

Then states have to work with ICAO to let the airlines know how much credits they need for offsetting.

What is a CORSIA Carbon Credit?

At this point, you may wonder what exactly is a CORSIA carbon credit. Simply put, it refers to the offset credits verified to comply with the scheme’s offsetting requirements.

As mentioned earlier, they’re from projects that reduce emissions. The credits are used to offset emissions from international air travel.

And same with other types of carbon credits, the validity of a CORSIA carbon credit is so essential. It has been the subject of vigorous debate, not just for aviation.

So to ensure the integrity of CORSIA credits, the ICAO Council came up with a list of emissions units for compliance. It follows a set of criteria to guarantee that the credits deliver the promised CO2 reductions.

The ICAO Council programs and emissions units eligible for CORSIA’s 2021-2023 pilot phase are:

American Carbon Registry
Architecture for REDD+ Transactions (ART)
China Greenhouse Gas (GHG) Voluntary Emission Reduction Program
Clean Development Mechanism (CDM)
Climate Action Reserve
Global Carbon Council (GCC)
The Gold Standard
Verified Carbon Standard (Verra)

How Much Will CORSIA Cost the Airlines?

Currently, the price of offsetting a tonne of CO2 depends on the quality of the credit and other factors. On average, prices stand at an average of only $3 – $5 per metric tonne of CO2.

This reflects a well-supplied market. But prices will begin to increase across both regulated and VCMs as demand drivers start to kick in.

The ICAO estimated the costs from CORSIA offsetting. Assuming that carbon prices range from a low of $6 – $12 to a high of $20 – $40 per tonne of CO2, the following chart shows how much CORSIA will cost the airline operators.

The low estimate is based on the CAEP’s “optimistic” CO2 scenario and IEA’s low carbon price forecast. The high estimate is based on CAEP’s “less optimistic” CO2 scenario and IEA’s high carbon price forecast.

The cost analysis shows that the cost can range from about 0.4% – 1.4% of total ICAO forecast revenues from international aviation in 2035.

IATA also estimated that the cost from CORSIA offsetting will have less impact on the aviation sector than fuel price volatility.

In figures, the cost in 2030 equals a $2.60 increase in jet fuel price per barrel. This means that another $10 per barrel on the price of jet fuel will cost the industry about 4x the estimated cost of offsets in 2030.

While the current price for a carbon offset is low, estimates say this may rise as high as $90 by 2050.

Conclusion

CORSIA is a significant first step in the aviation industry’s effort to tackle climate change. But since carbon credits are not created equal, due diligence is still necessary to ensure the emission permits are high quality.

Amid the issues and criticisms about CORSIA, it remains a key milestone in the industry’s and the airlines’ race to net zero.

The post What is CORSIA? All the Important Things You Must Know appeared first on Carbon Credits.

Britain’s largest domestic bank Lloyds Bank will no longer provide direct financing to fossil fuel projects as part of its new climate policy.

The finance giant announced that will not fund any new gas, oil, and coal projects to support the UK’s transition to a sustainable, low-carbon economy.

Doing so allows Britain’s biggest domestic bank to join a small group of lenders pushing back on funding the expansion of the fossil fuel industry.

Lloyds Bank’s New Climate Policy

Hailed as “radical reinvention” Lloyds Bank’s new climate policy will still provide general lending to firms in the sector but bars project financing or reserved-based lending to fossil fuel projects.

A statement from the policy said that:

“Addressing the potential impacts of climate change, how our customers are engaging with the opportunities and challenges created by climate change and the need to transition to a low carbon economy plays a key role in our risk management approach to sustainability.

The British bank also added that it encourages customers to minimize dependence on carbon-intensive sources of revenue to hasten the shift to a low-carbon economy. It further stated that it will stop working with clients who don’t meet their new climate requirements.

Environmental groups welcomed the lender’s move while calling other British banks to do the same.

For Tony Burdon, the CEO of Make My Money Matter:

“Lloyds’ new policy marks an important turning point in the dangerous relationship that exists between leading UK banks and fossil fuel companies.

The bank is the first of the five largest lenders in the UK to halt direct financing of new fossil fuel projects.

This move comes just weeks following the UK’s pledge to give a go for new exploration in the North Sea over concerns about energy security. The British government announced dozens of new oil and gas licenses in the region to boost domestic production.

Banks and other financial institutions are under growing pressure to end support to companies that worsen the climate crisis.

The Trend to End Fossil Fuel Financing

Fossil fuel financing from the world’s biggest lenders has totaled $4.6 trillion in the 6 years since the Paris Agreement was signed in 2015.

$742 billion of that went to fossil fuel financing for the year 2021 alone, according to estimates.

Lloyds had invested around 1 billion pounds ($1.1 billion) in its commercial oil and gas clients in 2021 as per its climate report. That figure accounted for a very small fraction of its overall lending – only 0.2%.

The bank’s exposure to the dirty industry is relatively small compared to its global competitors. That’s because it’s focusing on domestic lending only.

But its decision reflects the increasing trend in pressuring banks to help speed up the transition to a low-carbon economy as the next round of COP climate conferences happens in Egypt next month.

While other banks are tightening their climate lending policies in line with the Paris Agreement, most of the large lenders in the U.S., however, continue to back expansion in the sector.

Earlier this year, three major American banks – Citigroup, Wells Fargo, and Bank of America – rejected shareholders’ proposals to align lending practices with climate targets.

The chart below shows major banks favoring fossil fuel financing from 2016 to 2021. JP Morgan topped the list.

But Lloyds Bank promises to take the climate into account in their credit assessment process. It said it dedicated sustainability training to staff to fulfill its climate pledge.

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In the world of carbon emissions reduction, there’s one concept that receives a lot of attention when it comes to crediting forest protection – REDD+.

But what exactly is the fuss about it? How does it differ from REDD?

Many are also asking about what are REDD+ strategies and how they’re being funded. Others are also wondering if they are indeed a better alternative logging or if they’re really sustainable.

If you also have the same questions and more in mind, then this article will give you the answers. We’ll discuss all about REDD+, what it means, who started it, how it’s funded, the different approaches to it, and more.

What is the Difference Between REDD and REDD+?

Greenhouse gas emissions due to deforestation and forest degradation account for nearly 20% of global GHG emissions. It is for this reason that REDD is seen as a crucial part of any climate change mitigation actions.

REDD stands for “reducing emissions from deforestation and forest degradation”. It refers to all activities that do just that.

So what about REDD+ and how does it differ from REDD?

Though they’re very much similar, they’re different from each other. But the only difference is the “plus” which refers to the “role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries”.

Who Started REDD+?

The framework is created by the UNFCCC Conference of the Parties (COP) to help guide activities in the forest sector. It was first introduced in 2007 and the Paris Agreement brought it into fruition.

The Agreement links individual forestry projects and REDD+ strategies of their host countries.

Article 5 of the Agreement is dedicated to the contribution of forests to mitigating climate change. Under this article, it becomes the duty of all rainforest nations to give REDD+ due importance by supporting its implementation in line with all UNFCCC decisions.

The same article also formalizes the architecture of the REDD+ mechanism and all the details and guidance in adopting it. The implementation of its activities is voluntary and depends on the circumstances and capabilities of each developing country.

Unfortunately, it hasn’t achieved its full potential yet as a large-scale funding mechanism to pay rainforest countries and communities for avoided forest emissions.

To limit global warming increase to 2°C or 1.5°C at the best, emissions from forest loss must be stopped.

Not only does forest loss worsen the climate crisis, it also poses threats to biodiversity. It also impacts the lives of billions of people living on forest resources.

And so protecting forests is an urgent action. But it also calls for large sums of money to do that successfully. In fact, it needs hundreds of billions of dollars of investments to carry out REDD+ strategies.

What are REDD+ Strategies?

REDD+ strategies refer to a set of policies and programs meant to reduce emissions from deforestation and forest degradation. All the while enhancing carbon uptake from other forest protection activities.

The strategies define the following elements of REDD+:

Direct and indirect drivers of deforestation
Baselines and forest monitoring systems
Reference emissions levels
Social and environmental safeguards

Those strategies have become a catalyst to help countries analyze and reform wider forestry, land tenure and sustainable development policies.

They have also helped boost the engagement of a wider range of stakeholder groups in forest and land management. They include the indigenous peoples, women and other forest-dependent communities. All these gave those groups more access and rights to forestry and land use decision making.

But there’s another important question that stakeholders demand an answer – is REDD+ sustainable? Why is it a better alternative to logging?

Sustainability of REDD+ Programs

Simply put, REDD+ involves some kind of incentive for altering the way forest resources are used and managed. As such, it offers a new way of cutting carbon emissions by incentivizing actions that avoid forest loss or degradation.

These transfer mechanisms often include payments via carbon credits. And these credits are paid not just for keeping the trees standing; they’re given for lowering the historical amount of emissions emitted.

Forestland owners will be penalized if they cut down trees and so loss the potential income.

On the contrary, some studies showed that outcomes from REDD+ programs are even more competitive than what logging provides.

That’s for the reason that the “plus” offers several co-benefits that don’t tackle carbon emissions only but also gives local communities more benefits. These include improved access to forest resources and better quality of living.

REDD+ projects contribute directly to achieving the UN Sustainable Development Goals (SDGs). They addresses SGDs on poverty reduction, health and well-being, hunger alleviation, and improving institutions.

On the other hand, logging provides financial income only and most of the benefits or profits go to company owners, not the local community.

Better yet, technological advancements are changing the game when it comes to monitoring what’s going on in forests, both below and above ground. Overseers can now produce exact forest carbon stock data, keep track and respond to risks, and show the rate of regenerating the forest.

Best of all, there have been instruments in place that resolve concerns surrounding forestry projects. They act as an insurance mechanism against uncertainties in calculating carbon credits from forestry projects.

And as countries create various kinds of REDD+ strategies to fit their needs, there’s a common principle underlying all of them. That is:

They must result in real, measurable and long-term benefits related to the mitigation of climate change and align with national development strategies of those countries.

What are REDD+ Countries?

REDD+ countries are developing nations located in a subtropical or tropical area that have signed a Participation Agreement to participate in the Readiness Fund. Together they form the Forest Carbon Partnership Facility or FCPF.

There are 47 developing countries that were initially selected to join the FCPF – 18 are in Africa, 18 in Latin America, and 11 in the Asia-Pacific region.

The FCPF created a framework and processes for REDD+ readiness. It helps countries get ready for future systems of financial incentives for REDD+.

By using the framework, countries develop an understanding of what it means to be ready for REDD+. They’re now focusing on operationalizing both their REDD+ strategies and proposals for larger forestry programs.

At the readiness stage, that means formulating national strategies that prioritize key drivers of deforestation and degradation. It also involves proposing realistic means to fix barriers to become a REDD+ country.

Their ultimate goal is to build investment packages that will produce emissions reductions and results-based finance.

Carbon markets have been recognized as a good source of finance where REDD+ carbon credits come in.

As of 1st quarter of 2022, more than 398 million REDD+ credits have been issued on the voluntary carbon market (VCM). That amount represents a quarter of total voluntary carbon credits issued.

When it comes to its performance, here’s how REDD+ carbon credits price has grown. It’s part of the nature-based avoidance credits.

Given the high potential of REDD+ in avoiding emissions and delivering other impacts, governments and companies become interested in investing in REDD+ strategies. But how can they help fund these projects?

How REDD+ is Funded?

There’s a national REDD+ funding mechanism that serves as a fund coordination and distribution platform for those who are willing to financially support the implementation of REDD+ strategies. Via this funding mechanism, donors or contributors can commit resources to the fund.

Financial support for the projects can also be done up front to back different activities. They range from delivering technical assistance to building capacity and executing REDD+ strategies on the ground.

While there are many channels for the funds to support forestry projects, carbon credits have been among the top means.

To date, REDD+ credits on the VCMs are from individual projects. This is when REDD+ activities are focused on a specific area of forest where a baseline of deforestation is established. The reference data covers only the nearby forested areas, not the national level.

The number of credits issued depends on how much deforestation has reduced relative to the baseline. So far, individual projects are the successful approach in getting REDD+ carbon credits to the VCM.

In addition, despite criticisms surrounding the project’s MRV – monitoring, reporting, and verification – technological advancements resolve them. These include the high resolution, multi-model satellite imagery, Lidar, and real-time data transmission.

Analysis shows that REDD+ projects yield many credits with verifiable, additional, and long-term carbon emission reductions, as well as measurable co-benefits.

However, there are a couple of challenges to individual project-level REDD+. These include:

inflated baselines,
underreporting of deforestation,
forest loss causing permanence risk, and
risks caused by land tenure and rights

It is for these issues that going for a jurisdictional approach can help fix the problem.

This approach follows the same concept of REDD+ but differs from project-based in scale; it covers national forests. Plus, jurisdictional REDD+ have not been used to issue voluntary carbon credits.

Rather, it helps generate the new asset in the carbon market – sovereign carbon credits. It’s also used as a basis for results-based finance agreements between nations or with multilateral organizations like the World Bank.

What makes it different from project-level is that it considers all the national or subnational forests when establishing a baseline and monitoring progress. And with the advances of artificial intelligence and remote-sensing, it becomes possible to achieve it with high accuracy.

Jurisdictional REDD+ reduces the risk of over-crediting due to inflated baselines. It also allows for more efficient use of the government’s resources. This can help hasten access to upfront funding.

Meanwhile, some countries are also considering other approaches in their strategies such as the nested approach.

Nested program align with jurisdictional baselines and serve as an intermediate step between the two different approaches. They may also offer a good solution to overcoming the challenges of project-based deforestation and degradation programs.

How REDD+ countries develop their nesting approaches relates to their carbon ownership rights. Though many of them don’t mind transferring the right to produce carbon credits to private firms, it’s not always the case.

Some countries allow individual projects to become a jurisdictional program without having its own carbon crediting system. But others may also let those projects to have a separate crediting system.

Delivering Emissions Reductions

Yet, regardless of the approach, the carbon credits it generates still have to be of high quality. While jurisdictional and nested types may address systemic risks, it’s still crucial to ensure that the credits deliver on their emissions reduction claims.

No matter the type of REDD+ program, its carbon credits still need to be of quality. And since the factors that determine quality are diverse and can be complex, as a buyer of the credit, you should perform due diligence on any credits you buy.

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