PNG Suspends New Carbon Credit Deals While Writing New Rules

The government of Papua New Guinea (PNG), suspended new voluntary carbon credit schemes while making new rules to govern them.
 
PNG decided to develop a stronger legal framework governing voluntary carbon credit deals. These carbon credit schemes are arrangements made between developers and resource owners directly. Government is not part of the negotiation.
 
While PNG is creating new laws, the environment ministry, Wera Mori, set a moratorium on new carbon deals. This action was due to red flags raised over a new carbon credit deal in the Oro province.
 
The temporary ban covers all the new carbon deals. The ministry said that this is “… To ensure proper stock take and audit of existing voluntary carbon projects.”

Why PNG Bans Voluntary Carbon Credit Deals

The moratorium came after an industry watchdog, got the government’s attention. The group faulted the 100-year carbon credit scheme in Oro province, citing a lack of key details.
 
They also called on Verra, a global certifying body for voluntary carbon standards, to reject the Oro deal.
 
In response, the PNG government banned the deal and other new carbon credit schemes in the meantime. But once the new regulations are in place, the voluntary carbon market in the country will be open again.
 
Though the suspension will impact the carbon credit market big time, it’s a must. In fact, the Oro province governor, Gary Juffa, said that it’s well overdue.
 
Juffa noted that this has been the case for far too long already. The so-called “carbon cowboys” have been collecting big profits from carbon credit deals. But they are giving the forest stewards and caretakers in the province very little.
 
The coalition of other concerned society groups is also pressuring the government to have strict rules regulating the market. They said that there are already voluntary carbon projects in every part of PNG.
Without the safeguards like free, prior, and informed consent (FPIC), the market will take advantage of the native landowners.
 
FPIC is a legal tool meant to protect native landowners against commercial loggers.

The Carbon Credit Market and PNG

Carbon credits are regarded as a pivotal means for countries to hit net-zero emissions goals. Unfortunately, outside Europe, the voluntary carbon credit market remains unregulated. And the case of PNG is one example.
 
The country is home to the world’s 3rd largest tropical rainforest. It keeps 7% of the earth’s biodiversity, making PNG so attractive to carbon financiers.
 
Even more important, protecting the forests is vital to PNG’s climate goals. That is to halve emissions by 2030 and be carbon neutral by 2050.
 
Also, PNG has been the world’s biggest tropical timber exporter since 2014. But, over 70% of timber production in the country is illegal, according to reports.
 
So, if carbon cowboys continue to sway landowners to do unregulated carbon projects, the forests will be at risk.
 
Hence, having safeguards on these projects is crucial for PNG’s carbon market to thrive, ensuring that there is proper oversight

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IPCC AR6 Report on Climate Change: We Must Act Now

The Intergovernmental Panel on Climate Change (IPCC) released the third and final installment of its AR6 report on climate change.
 
The report is Working Group III’s contribution to IPCC Sixth Assessment Report (AR6). It was published today after getting the approval of 195 member governments of the IPCC.
 
Along with the two other AR6 reports, this report is vital for climate science analysis. 
 
In general, it provides scientific data on annual GHG emissions from 2010 to 2019. It also lays out potential solutions on how to reduce emissions. These solutions are the consolidated ideas of 278 scientists from 65 countries.

Evidence Presented in IPCC AR6 Report on Climate Change

The key message of the report is this: to make our planet safe for the next generations, we must act now. It means the entire world needs urgent action to reduce GHG emissions across all sectors.
 
Otherwise, the goal to limit global warming to the critical 1.5 degrees Celsius is beyond reach.
 

The IPCC’s AR6 report on climate change shows scientific evidence why we should act now or it would be too late.

From 2010 to 2019, the average annual global GHG emissions were at their highest historical levels, as shown below.

Though the rate of increase has slowed down, the next few years’ warming reductions are critical.
 
The assessment indicates that getting to 1.5°C requires GHG emissions to peak before 2025, at the latest. Then the emissions must go down by 43% by 2030. Meanwhile, a reduction of around a third in methane is also a must.
 
In the words of the IPCC Chair, Hoesung Lee, We are at a crossroads. The decisions we make now can secure a liveable future. We have the tools and know-how required to limit warming.”
 
Lee also noted that there are climate actions taken by countries that are proving effective. Likewise, there has been a consistent decrease in the costs of renewable energy of up to 85% since 2010.
 
Another essential report highlight is the creation of policies that improved energy efficiency. Also, global efforts had lowered deforestation rates while enhancing the use of renewables.
But still, more concerted efforts to achieve massive emissions reductions are necessary.

IPCC’s AR6 Solutions to Mitigate Global Warming

The AR6 report outlines climate mitigation strategies that cover all the major sectors. These include energy, transport, buildings, urban, industry, forestry, and agriculture.
 
Scientists in the IPCC believe that if those climate mitigations will take effect, the world can at least reduce emissions by half by 2030.
 
While rapid reductions have to occur across the board, the biggest impact will be from the energy sector. This means significant reductions in fossil fuel use and widespread electrification. It also calls for more energy efficiency and the use of alternative fuels like hydrogen.
 
In other main emitter sectors, the same solutions may also help reduce emissions. Carbon capture and storage can also be a potential option to help mitigate warming.
 
Finally, IPCC’s AR6 report on climate change stresses the need to consider other means. The two important ones are closing global investment gaps and achieving SDGs.
 
All three IPCC AR6 reports will be synthesized and published in September right before the major COP27 happens in Egypt.

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India’s Ambitious Climate Goal Threatens by the Power Sector

India’s lofty climate goal is at risk due to the financial problems that power retailers face, along with other issues.

Part of the country’s green plan is to increase renewable energy capacity by the end of 2022.

But estimates from BloombergNEF reveal that India is likely to miss its 175 GW target. This translates to around 36% of failing to achieve such renewables goal.

This scenario is an indicator that the country is having structural issues on its way to net zero. The power suppliers, in particular, which control about 90% of the nation’s electricity supply are one of the main culprits.

How Hard is it to Achieve India’s Climate Goal?

The financial distress of India’s power retailers is the key reason why its 2022 target seems to fail. They struggle to pay off debts and recover losses, affecting their service delivery.

Such a situation led to power suppliers’ missed payments to power producers. In effect, it also impacts other transactions across the industry, hindering growth.

For instance, wind projects that won government auctions did not manage to take off. This is largely linked to the issues confronting the distribution utilities.

Thus, industry experts believe that it’s imperative not to rely on state power retailers in hitting India’s climate goal.

Otherwise, it will put the nation’s climate goals at risk.

One way to expand its renewables target is to use new technologies like green hydrogen. This prompted the government to use extreme measures to offer citizens affordable, clean energy.

Unfortunately, the quest for clean energy has driven energy prices too high. This makes things even more challenging for the nation to advance its climate plan. Other major factors are also at play.

Too many policy changes and tax matters.

Renewable energy is a business where making the most out of the investment is vital”, the CEO of a solar power developer said. But, if there are too many changes in a policy that affect the cost, growth in the sector becomes slow.

Also, taxes and import tariffs increases caused uncertainties in costs. For example, a sharp rise in renewable energy equipment taxes, from 5% to 12%, hit power developers so hard.

Likewise, major solar power developers in India are dubious about the new import tax. They are forced to delay big solar projects, holding 900 MW, because of a high customs tax of 40%.

Such is the case with the renewables partnership between Scatec ASA and Acme Solar Holdings. There are other renewables projects that can largely contribute to India’s climate goal. But those structural issues are putting them on hold.

So, What Comes Next for India?

India managed to report some renewables achievement, 152.9 GW + 72.6 GW, powered by hydro, solar, and wind. But still, such figures are too far from India’s ambitious climate goal set by Modi at the COP26 summit.

The country seeks to have 500 GW of renewables by 2030, getting huge interest from investors.

Yet, what’s even more critical than winning investors’ attention is fixing the major problems hurting the power sector in India.

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Netflix Bought 1.5 Million Carbon Credits in 2021

The streaming giant, Netflix, bought 1.5 million carbon credits in 2021.
 
The technology company said that such an amount of carbon offsets had cut down its scope 1 and 2 emissions by 10%. The carbon credits were from 17 carbon projects the firm chose from more than 150 million tonnes.

Projects Comprising Netflix Retired Carbon Credits

Most of the projects are under Verra, a global carbon crediting organization.
 
One of them is the Vida Manglar Blue Carbon. The project is for protecting the mangroves and biodiversity of the Colombian Caribbean. It accounts for the full value of mangroves as a nature-based climate solution.
 
Netflix also retired carbon offsets from various projects verified in the Verra registry. These include the Chyulu Hills REDD+ Project which protects 410,000 hectares of forest in Kenya.
 
Another one is the Envira Amazonia Project. It is a tropical rainforest conservation project in Brazil. Likewise, the Kasigau Corridor REDD+ Project also protects a wildlife forest in Africa.
 
Other projects are the Northern Kenya Grasslands Project and the Reforesting Degraded Lands in Chile. Both projects are also under Verra management.
 
With those carbon projects, Netflix stated it had avoided about 14,000 tonnes of emissions last year. Retiring the credits from the projects enabled the firm to be on track with its carbon goals.

Netflix Net-Zero Carbon Targets

Last March 2021, Netflix revealed its “Net Zero + Nature” plan to hit net-zero GHG emissions by the end of 2022. The company’s approach to net-zero involves three R’s: Reduce, Retain and Remove.
 
Reduce means reducing Netflix scope 1 and 2 emissions by 45% in 2030, per the SBTi Guidance. This requires switching to using renewables and sustainable aviation fuel during film productions.
 
Retain involves keeping existing carbon storage by preventing more CO2 from reaching the air. Under this strategy, Netflix focuses on carbon credits that conserve at-risk natural areas. These include tropical forests and other critical ecosystems.
 
Lastly, Remove refers to investments in projects that capture and store carbon through natural solutions like grasslands and mangroves. The Vida Manglar Blue Carbon, in particular, is an example.
 

What makes Netflix’s carbon offset projects of high quality is its diligent evaluation process. It includes a five-step screening of RFP-based procurement, resulting in identifying the highest-quality nature-based projects

 
According to reports, Netflix managed to retire a total of 1.3 million carbon credits from the start of 2021.
 
Unfortunately, all full-scope emissions increased by 50% from 1.05 million tonnes in 2020 to 1.54 million tonnes in 2021. This was due to the increase in TV and film productions after the pandemic.

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The Importance of Scope 3 Emissions in The Race to Net-Zero

The pressure to seek net-zero pledges that include Scope 3 emissions is rising.

Here is an overview of the differences between Scope 1, Scope 2, and Scope 3 emissions.

CO2 emissions falling under Scope 3 include value chain emissions, and carbon footprint from suppliers, customers, business travels, company leases, and more.

Businesses with low Scope 1 and 2 emissions, but high Scope 3 emissions may soon face financial issues if they don’t pay attention to it. Why is that so?

Investors’ Focus Favoring the Importance of Scope 3 Emissions

Before investors were looking for companies to reduce only operational emissions (Scope 1) and indirect emissions from energy purchases (Scope 2).

But now, they are shifting their focus to the whole business supply chain.

ESG investors are looking for companies that are able to change and commit to achieving climate goals.

Thus, the main question they have concerns the entire activities that firms are doing or not relating to emissions. This means the importance of Scope 3 emissions is of high interest, too. In fact, it is where the largest carbon footprint is happening.

According to the Greenhouse Gas Protocol, there are 15 classes of Scope 3 emissions. GHG Protocol uses a world-renowned standard to measure and manage GHG emissions of companies and their value chains. It identifies “purchased goods and services” and “use of sold products” as most vital.

Take for instance the case of the oil and gas industry. O&G companies often have big Scope 3 emissions from end-product combustion.

Those value chain emissions are even much higher, 6x or more than the combined Scope 1 and 2 emissions.

In fact, many businesses have Scope 3 emissions that account for over 70% of their total footprint.

Why Dealing With Value Chain Emissions is Tricky?

As investors prefer a low emissions economy, a company’s climate plans have to align with it. But, companies with high supply chain emissions but low operational emissions may find it tough.

The financial challenge is due to various things. These include policy risks, carbon pricing, and shifts in end-product market demand.

Worse is that companies don’t have enough control over their Scope 3 emissions. This makes factoring in and managing supply chains emissions complex and burdensome.

Complicating the issue is a lack of regulatory guidance promoting the importance of Scope 3 emissions.

SEC had recently issued a proposed rule on emissions disclosure. Yet, while it has clear guidelines on Scopes 1 and 2 disclosure, disclosing supply chain emissions is left to the company to determine.

Is Scope 3 emissions “material” to disclose, too? It depends on the firm to decide.

For bigger companies that have been reporting all their emissions, it is a must. But for smaller ones that don’t have the capacity to do it, they are an exception to the SEC’s rule.

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IETA Releases Guidelines on Blockchain Use in Carbon Markets

The International Emissions Trading Association issued guidelines on blockchain use in carbon markets.
 
IETA is the main lobby group for the international Voluntary Carbon Markets (VCM). It aims to establish a functional framework for trading in GHG emission reductions.
 
For years, the IETA is tracking digital innovations that can improve VCM performance. Just recently, it has issued a set of preliminary principles for using blockchain in VCMs.

What Prompts IETA’s Guidelines on Blockchain Use in Carbon Markets?

The IETA has observed the rapid emergence of digital carbon assets. And so, they decided to create the guidelines as a precautionary measure. They added that digital tokens must only be from recognized carbon standards.
 
Likewise, the IETA requested carbon registries like Gold Standard to make proper labeling. More so, they need to hold carbon credits in escrow accounts to prevent double selling.
 
Also, the body calls on all carbon standards to review blockchain providers. This is part of the industry’s Know Your Customer (KYC) and Anti-Money Laundering (AML) checks.
The following are some of the key points of IETA’s preliminary guidelines.

IETA’s Initial Guiding Principles on Blockchain

Credible standards: carbon-backed digital tokens should come from verified and registered projects. Only government-approved carbon crediting schemes or the Standards must endorse those projects.
Registry control: it is only the Standards that may permit carbon credits tokenization. And so, the Standards must have a system in place to perform this role.
Tokens: tokens that are for issuance and verified are valid for stamping. But unverified, canceled, and retired carbon credits are not qualified for tokens.
Transparency: all token issuers are subject to KYC and AML reviews. This is important for consumer protection and transparency.
Investor Safeguards: issuers must ensure that digital climate assets are fit for investors. This is crucial in cases where there is no direct link to the underlying carbon asset. 
IT Security: the use of proven methods of protection against cyber threats is a must.
Claims: only the removed and retired tokenized credits are permissible for claims. The mere holding of the credits, not retiring them, are not valid for compensation claims.

Impacts of IETA’s Principles on Blockchain

Right now, many items of the guidelines on blockchain use in carbon markets are not executed yet. This is because carbon-backed blockchain initiatives are a recent development in the market. In fact, they are not governed by carbon regulations.
 
According to IETA, if market players follow those set of principles, they can aid in market growth. The carbon crypto innovations will speed up market linkages and expand access in developing nations.
 
A word of caution, though, from the administering body. If not done right, incorrect blockchain use in carbon markets may threaten public confidence.

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Canada’s 2030 Emissions Reduction Plan: Clean Air, Strong Economy

The Canadian government released Canada’s 2030 Emissions Reduction Plan.
 
It is the first plan describing the nation’s pledge to reduce its GHG emissions, drawing on the Canadian Net-Zero Emissions Accountability Act.
 
The Canadian Climate Institute’s President, Rick Smith, responded to the plan. He said, “This is a watershed moment for Canadian climate policy… For the first time, Canada has a detailed plan for meeting its emissions reduction goals.”

What’s in Canada’s 2030 Emissions Reduction Plan?

The Plan describes various actions that are already making notable emissions reductions. Better still, it outlines the new measures Canada needs to achieve its 2030 target and 2050 net-zero emissions.
Canada’s 2030 Emissions Reduction Plan entails $9.1 billion in new investments. It also includes measures sector-by-sector, covering all sectors, from agriculture to industrial businesses.

Canada will reach its 2030 emissions target by:

Helping to reduce energy costs for homes and buildings
Decreasing carbon pollution from the oil and gas sector

Empowering communities to take climate action

Powering the economy with renewables
Investing in nature and natural climate solutions
Supporting farmers as partners in building a clean, prosperous future
Maintaining Canada’s approach to pricing pollution

In particular, part of Canada’s 2030 Emissions Reduction Plan is to invest $2.9 billion to make buying zero-emission vehicles (ZEVs) more affordable.

It will also have a regulated sales mandate so that 100% of new passenger cars sold will be zero-emission by 2035. The interim targets for ZEV are 20% by 2026 and 60% by 2030.

Canada’s  Emissions Reduction Plan also reveals another $780 million to invest in the power of nature to capture and store carbon. These include the oceans, wetlands, peatlands, grasslands, and agricultural lands. Investments in this area will further explore the potential for negative emission technologies.

Even more crucial is reducing oil and gas methane emissions by 75% in 2030 while creating good jobs. The estimated contribution for the oil and gas sector alone is a 31% reduction from 2005 levels. This is equal to a 42% reduction from 2019 levels.

In 2019, Canada’s total national GHG emissions were 730 mt of CO2 eq, which is 9 mt lower than in 2005.
 
The biggest emitters are still the oil and gas and transportation sectors. Their emissions had increased more since 2005. Luckily, decreases in emissions by other sectors cover those increases.
 
But still, the country aims to drive its total emissions down from its 2005 levels by 40% in 2030. That means reductions to only 443 mt.
 
In perspective, the following chart represents Canada’s 2030 Emissions Reduction Plan per sector.
Canada’s 2030 Emissions Reduction Model and Framework
Canada’s Emissions Reduction Plan uses economic modeling to show its pathway to 2030. The model captures the potential for each sector to reduce its own emissions by 2030.
 
Many other governments are also using the same approach in charting their path to net zero.
As for the Plan’s framework, the Canadian Climate Institute is responsible for it.
 
To ensure the success of Canada’s 2030 Plan, the Institute’s Framework includes three core elements. These are the consistent path to net-zero, credible policies, and responsive processes.

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ACX Signs MoU with CarbonX to Build Indonesian Carbon Market

AirCarbon Exchange (ACX) signed a partnership with CarbonX to help boost the Indonesian carbon market.

AirCarbon Exchange is a digital exchange seeking to speed up the globe’s journey to net zero. Whereas CarbonX is an Indonesian high-impact carbon asset developer.

They agree to develop the Indonesian marketplace via a memorandum of understanding (MoU).

How The Agreement Can Promote the Indonesian Carbon Market?

In general, the agreement will create a complete carbon infrastructure. Through it, participants worldwide can do business in an efficient and transparent fashion.

In particular, the MoU will enable the Indonesian carbon market to scale up. It will give carbon project developers access to ACX’s international carbon market. These include various participants from 30 different countries.

Indonesia’s Net Zero Emissions (NZE) Target

The signing of the MoU is very timely as Indonesia recently declared its commitment to net zero. During the COP26 Conference in Glasgow, it plans to reach its Net Zero Emissions or NZE goal by 2060 or sooner.

In fact, Presidential Regulation Number 98/2021 specifies Indonesia’s NZE target. This new rule on carbon trading created result-based payments for emission reduction projects. It also initiated the formation of a domestic carbon credit scheme to be set up by 2025.

To meet such targets, the nation needs huge investments in its marketplace of about 3.4% to 3.5% of its GDP each year.

And so, all Indonesian carbon market players have to work together to make the NZE plan a reality.

This is where the market platform created by the CarbonX-ACX collaboration comes in. It will help attract more carbon investments and funding.

The ACX-CarbonX Collaboration

CarbonX said that if things go as agreed, the market will yield large carbon offset supplies.

Meanwhile, ACX stated that the MoU is another milestone in its aim to be one of the premier carbon markets. They also believe that the partnership will boost Indonesian carbon asset producers.

Founded in 2019, ACX is a hybrid exchange that uses blockchain’s efficiency and speed. It operates through a traditional central order book architecture to perform its trading.

As such, the company bags one prestigious recognition in the voluntary carbon market (VCM). It won the Best Carbon Exchange in Environmental Finance’s 2021 VCM Rankings.

By leveraging ACX’s expertise, the CarbonX partnership will launch on a rapid scale. The Indonesian carbon market may begin to witness more carbon trading activities once the MoU takes off.

Earlier this year, Indonesia partnered with Singapore to advance its climate goals including carbon credits.

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LOT Polish Airlines Calls to Discard EU ETS for Aviation

Poland’s biggest airline, LOT Polish Airlines, urged to cancel the EU ETS due to rising jet fuel prices.

LOT Airlines CEO stated that the “EU ‘Fitfor55’ (strategy) needs to be fundamentally reviewed… it is extremely idealistic and I am afraid it is going to kill a number of airlines

After the outbreak of Russia’s invasion of Ukraine, jet fuel prices soared.
This affected the aviation sector so much, prompting LOT to demand the European Union Emissions Trading System be scrapped.

The Relationship Between EU ETS and Aviation

The EU ETS is the foundation of the EU’s policy to combat climate change. It is also the union’s key tool for reducing GHG emissions in a cost-effective way.
 
Under the EU ETS scheme, all airlines operating in Europe have to track their emissions. It is also required for them to report their emissions and buy carbon allowances against such emissions.
 
Since the outbreak of the war in Ukraine, jet fuel prices had surged along with the rest of the oil prices. Meanwhile, EU ETS futures have dropped from €95/mt before the war to only €78.22/mt after the invasion.
 
This affected the December 2022 contract but the amount is still higher compared to a year ago.
 
LOT’s CEO said that because of the big increase in fuel prices, the airline has to use economically and ecologically viable planes.
 
And thus, the aviation company calls out to the union to scrap the EU ETS for aviation.

LOT’s Reasons to Dump the EU ETS Scheme

LOT has been connecting Poland, Central, and Eastern Europe with the world for more than 9 decades now. The airline had flown around 12 million flights each year before the pandemic hit.
 
But the COVID-19 protocols forced the company to reschedule 13% of its flights. Worse is that it also has to cancel another 9% of its flights because of the war in the nearby country.
 
Not to mention the long flights to Asian destinations that need detouring to avoid the Russian airspace.
 
Also, Polish passengers’ demand to travel decreases as they are hesitant to leave their homes. Thus, the number of flights daily that the Polish airspace handles had dropped.
 
Add to this the fact that Europe is very dependent on Russian supply for distillates. Hence, with the lack of imports via the East of Suez because of the war, aviation fuel prices rose to multi-year highs.
 
According to the industry assessments, jet fuel cargoes increase by up to 42% since the eve of the war at $1,312.75/mt. This, and the very high levels of EU ETS certificates, have a big negative effect on all airline operators.
 
And so, LOT believes that it’s time to rethink the EU ETS for aviation as both the pandemic and the war put the sector under heavy financial stress.

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