Carbon Credits vs. Carbon Offsets

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Carbon Credits vs. Carbon Offsets: What’s the Difference?

At their core, both carbon credits and carbon offsets are accounting mechanisms. They provide a way to balance the scales of pollution. The big idea behind credits and offsets is that since CO2 is the same gas anywhere in the world, it doesn’t matter where emissions reduction happen.

For both consumers and companies, it makes financial sense to reduce emissions where it is cheapest and easiest to do so, even if that does not involve their own operations.

Offset and Credit Similarities

At the simplest level, a carbon credit or offset represents a reduction in or removal of greenhouse gas (GHG) emissions that compensates for CO2 emitted somewhere else. The instruments do have two major attributes in common:

One carbon credit or offset equals one tonne of carbon emissions.
Once a carbon credit or offset is purchased and the CO2 is emitted, that credit is “retired” and cannot be sold or used again.

Carbon Offsets and Carbon Credits Defined

While the terms “carbon credits” and “carbon offsets” are often used interchangeably, they refer to two distinct products that serve two different purposes. Before you begin purchasing either, it’s important to understand the difference between the two and which one will help you meet your goals. Here is a broad definition of the terms:

Carbon offset: A removal of GHGs from the atmosphere.
Carbon credit: A reduction in GHGs released into the atmosphere.

To help visualize the difference, imagine a water supply polluted by a nearby chemical plant. A “chemical offset” would mean pulling chemicals out of the water to help purify it. A “chemical credit” would mean paying another chemical company to release fewer chemicals into the water, so the overall level of pollution stays the same. Clear as mud? Great.

A Carbon Offset and Carbon Credit Primer*

Let’s dive a bit deeper into these products one at a time. Creating a carbon offset involves a fancy term we call “carbon sequestration.” Recall how a judge can order a jury to be sequestered—meaning they have to be sealed off from the outside world.

It works the same way with carbon: offsets involves CO2 emissions pulled out of the atmosphere and locked away for a period of time.

There is a growing list of ways to do this, including planting forests, blasting rock into tiny pieces, storing carbon in manufactured devices, capturing methane gas at a landfill, and the holy grail of carbon sequestration: using sophisticated technology to turn CO2 emissions into a usable product.

Carbon offsets are produced by independent companies that pull CO2 emissions from the atmosphere. The offsets are then sold to companies that emit (or have emitted) CO2. In a sense, offset-producing companies are directly funded by those companies that emit GHGs.

Carbon credits, on the other hand, are generally “created” by the government. Governments limit the amount of GHGs organizations can emit by placing a cap on them—a specific number of tons of CO2 the company can emit. Each of those tons are referred to as a carbon credit.

Companies comply with that cap by reducing the emissions produced in their operations through improving energy efficiency or switching to renewable energy sources. An organization that brings its overall emissions below what is required by law can sell the excess credits to businesses that are unable or unwilling to cut their own emissions to become compliant.

There are a few other ways to produce carbon credits. For more detail, see our article on carbon credits.

The Two Carbon Markets

There’s one more important distinction between carbon credits and carbon offsets:

Carbon credits are generally transacted in the carbon compliance market.
Carbon offsets are generally transacted in the voluntary carbon market.

Mandatory schemes limiting the amount of GHG emissions grew in number. And with them, a fragmented carbon compliance market is developing. For example, the EU has an Emissions Trading System (ETS) that enables companies to buy carbon credits from other companies.

California runs its own cap-and-trade program. Nine other states on the eastern seaboard have formed their own cap-and-trade conglomerate, the Regional Greenhouse Gas Initiative.

The voluntary carbon market (think: offsets) is much smaller than the compliance market, but expected to grow much bigger in the coming years. It is open to individuals, companies, and other organizations that want to reduce or eliminate their carbon footprint, but are not necessarily required to by law.

Consumers can purchase offsets for emissions from a specific high-emission activity. An example would be a long flight. Or they can buy offsets on a regular basis to eliminate their ongoing carbon footprint.

Do I Need Carbon Offsets or Carbon Credits?

Now that you know their differences and what they have in common, here’s how carbon credits and carbon offsets work in the grand, global scheme of emissions reduction.

The government is putting heavy caps on GHG emissions, meaning that companies will have to reconfigure operations to reduce emissions as much as possible. Those that cannot be eliminated will have to be accounted for through the purchase of carbon credits. Ambitious organizations, corporations, and people can purchase carbon offsets to nullify previous emissions or to reach net zero.

So which do you need? If you’re a corporation, the answer is likely “both”—but it all depends on your business goals. If you’re a consumer, carbon credits are likely unavailable to you. But you can do your part by purchasing carbon offsets.

Returning to the illustration from earlier, our vital, global goal is to both stop dumping chemicals into the metaphorical water supply, and to purify the existing water supply over time. In other words, we need to both drastically reduce CO2 emissions. And then we work to remove the CO2 currently in the atmosphere if we want to materially reduce pollution.

*Note: See our in-depth articles on carbon credits and carbon offsets for a closer look at how they work.

 

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ICVCM Axes Renewable Energy Carbon Credits from CCP Label

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The Integrity Council for the Voluntary Carbon Market (ICVCM) has announced that carbon credits issued under existing renewable energy methodologies will not be eligible for its Core Carbon Principles (CCP) designation. This decision affects nearly one-third (32%) of the voluntary carbon market or about 236 million carbon credits. 333

ICVCM’s Decision Is Based on “Additionality”

The ICVCM’s decision is based on the concept of “additionality,” which asserts that the projects in question might have proceeded without the financial incentives from carbon credits. The Core Carbon Principles are designed to ensure that carbon credits contribute to emissions reductions that wouldn’t have occurred otherwise.

READ MORE: The Core Carbon Principles

The CCP framework requires that the emissions reductions from carbon credits be additional, meaning they would not have happened without the carbon credit revenue. This principle is applied to eight methodologies, including grid-connected renewable energy generation and biomass energy production. They collectively represent about 236 million credits, or 32% of the voluntary carbon market (VCM).

Additionality is typically assessed in two ways: through investment returns or “common practice.” When examining over 1,700 registered projects, MSCI found that carbon credits contributed to less than 4% of total revenue, with hydro and solar projects even lower at around 3%.

Percentage of project revenue coming from carbon credits

Chart from MSCI

This low revenue share suggests that carbon credits were unlikely to be a decisive factor in the development of renewable energy plants, especially for large-scale hydro, wind, or solar projects with significant upfront capital costs.

The CCP label now applies only to credits from five vetted programs using approved methodologies.

In June, the Integrity Council approved two types of projects for its Core Carbon Principles label. These include projects that capture methane from landfills and those that remove ozone-depleting gases from discarded equipment, such as air conditioners. However, these approvals faced criticism for not providing additional emissions reductions.

How Can This Impact the Carbon Offset Market?

ICVCM’s move could severely impact the carbon offset market, which has already shrunk nearly 25% from its 2022 peak, as shown in the chart below. It also highlights ongoing efforts to address criticisms of carbon offsetting, which has been accused of enabling greenwashing. 

Chart from BNNBloomberg

SEE MORE: Will This Be The End of Carbon Offsets?

The ICVCM argues that the current methodologies are inadequate in determining if projects would have progressed without carbon credit revenues.

Climate experts have long criticized renewable energy credits, arguing they are ineffective because renewables are already a viable alternative to fossil fuels. Thus, carbon credits often do not influence decisions to develop or expand green energy projects, benefiting developers instead.

ALSO READ: What are Renewable Energy Credits vs. Carbon Credits

In 2022, renewable energy credits made up about 50% of offset purchases, up from 38% the previous year, according to Bloomberg. Major companies like Volkswagen, Etsy, and TotalEnergies have been among those purchasing these credits. 

However, investigations have questioned the credibility of many offsets, prompting the ICVCM to impose stricter standards.

Greenlighting New Carbon Project Methodologies

On Tuesday, the ICVCM approved two more methodologies for the CCP label:

detecting and repairing methane leaks in the gas industry and
capturing methane from landfills.

The board rejected a methodology for reducing sulfur hexafluoride emissions in the magnesium industry. The ICVCM is also evaluating other offset categories, including REDD+ forestry methods, with decisions expected soon.

Currently, about 27 million credits, or 3.6% of the market, are eligible for the CCP label. The ICVCM is open to new, more rigorous renewable energy credit methodologies if they can promote clean energy in areas where it is not yet established.

READ MORE: ICVCM Reveals First CCP-Approved Carbon Credits Worth 27M

Annette Nazareth, chair of the ICVCM, emphasized that carbon credits are a crucial financing tool. She further noted that:

“Renewable energy projects financed by carbon credits still have a role to play in the decarbonisation of energy grids because it remains challenging for many least developed countries to secure the investment they need to transition away from fossil fuels.” 

While the ICVCM has rejected these methodologies for the CCP label, it acknowledged the importance of scaling renewable energy to achieve global climate targets. Major carbon credit registries like Verra and Gold Standard stopped accepting new grid-connected renewable energy projects in 2019, except for those in least-developed countries (LDCs).  

What’s the Path Forward for Renewable Energy Credits?

According to Carbon Market Watch, over 280 million renewable energy credits are available in the voluntary carbon market. If all these credits were used, they could theoretically offset emissions equivalent to Thailand’s annual carbon dioxide output.

Inigo Wyburd, a policy expert at Carbon Market Watch, praised the ICVCM’s decision as a “positive step.” He said that it addresses the issue of low-quality credits that have been undermining the market. 

Despite widespread skepticism about the effectiveness of renewable energy credits, they remain popular among corporate buyers, including fossil fuel majors like Shell and Total, as well as automakers and cruise operators.

Due to concerns about the validity of the emissions reductions claimed by renewable energy credits, their market price has significantly dropped over the last two years. 

Data from MSCI shows that the average price of these credits is just $2 per tonne of carbon dioxide equivalent reduced. That’s less than half the price of offsets from projects aimed at forest conservation, methane emission reduction, or energy efficiency. The ICVCM’s recent decision is likely to further drive down these carbon prices.

Despite rejecting the current renewable energy methodologies for the CCP label, Amy Merrill, CEO of the ICVCM, suggested that improved methodologies could still gain approval. She emphasized that while renewable energy costs have fallen globally, they remain high in certain regions including:

remote rural areas of developing countries,
on islands with small populations, and
in areas where renewable energy faces ideological resistance.

Methodologies that address these challenges could be strong candidates for future CCP approval. The ICVCM is open to reviewing more rigorous renewable energy methodologies in the future, particularly for projects in regions where renewable energy is challenging to implement.

READ FURTHER: Private Equity Buys In Renewable Energy Big Time, Almost $15B

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ExxonMobil Q2 Highlights Stellar Profits and Reduced Emissions

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In an impressive second quarter, ExxonMobil has revealed record profits while cutting emissions. The company’s strong financial results and reduced environmental impact highlight its success in balancing profitability with sustainability.

Exxon Excels in Q2 Profits

ExxonMobil reported its second-quarter 2024 earnings on August 2, revealing a strong financial performance. The company earned $9.2 billion, or an adjusted $2.14 per share. This indicated a 17% jump from the previous year’s profits of $7.9 billion. The acquisition of Pioneer Natural, finalized in May, boosted Exxon’s earnings by $500 million.

Furthermore, excluding working capital movements, cash flow from operations reached $15.2 billion. Exxon Mobil also distributed $9.5 billion to shareholders, including $4.3 billion in dividends and $5.2 billion in share repurchases. These results are consistent with the company’s announced plans.

Darren Woods, Exxon’s chairman and CEO remarked,

“We delivered our second-highest 2Q earnings of the past decade as we continue to improve the fundamental earnings power of the company.”

The company achieved the highest production levels in Guyana and the Permian Basin. As per their press release, total net production in Upstream rose by 15%, adding 574,000 oil-equivalent barrels per day from the first quarter.

Exxon also added new businesses. For example, they advanced their carbon capture and storage (CCS) efforts with a new deal that boosted the total contracted CO2 offtake with industrial customers to 5.5 million metric tons annually. This amount is the biggest ever announced by any company.

READ MORE: ExxonMobil to Spend $15B to Reduce Carbon Emissions

ExxonMobil: Cutting Emissions for Cleaner Air

The company has reduced its emissions of nitrogen oxides, sulfur oxides, and volatile organic compounds from 2016 to 2022 by about 23%. Key steps highlighted in their sustainability report are:

Understanding the composition and extent of emissions
Meeting or exceeding environmental regulations
Reducing air emissions to minimize local impacts
Monitoring air quality science and health standards

For new projects, Exxon follows strict environmental policies and standards. They guide facility designs and operations and practice specific procedures at each site to control air emissions effectively.

In 2023, ExxonMobil’s equity-based GHG emissions were 111MMTCO2e.

This was a reduction of 2mmt compared to the previous year. Additionally, their 2030 plans to reduce GHG emissions are intensity-based. They focus on reducing Scope 1 and 2 emissions from their operations, compared to 2016 levels.

Check out the emission data below ranging from 2016-2023.

source: ExxonMobil

These actions are also expected to achieve a 20% absolute reduction in corporate-wide GHG emissions with the 2016 baseline. Notably, Exxon’s 2030 emission reduction plans align with the Paris Agreement.

Statista reported that in 1965, the oil giant released more than 40 billion metric tons of carbon dioxide equivalent, making it one of the biggest contributors to global greenhouse gas emissions in the world.

Woods further said,

“The focused actions we have taken have enabled us to accelerate greenhouse gas reductions, particularly in the areas of methane and flaring. We anticipate meeting our 2025 greenhouse gas emission-reduction plans ahead of schedule, which gives us the confidence to set more aggressive medium-term goals across all of our businesses.”

Net-Zero Path: Pioneering in Low Carbon Solution Business

As the world moves toward net zero, emission-reduction markets are set to grow. Exxon wants to create opportunities for its Low Carbon Solutions business which is significant for their expansion. Apart from mitigating emissions, they focus on strong returns and value during the energy transition.

“Our company manages molecules”- Exxon

For decades, Exxon has focused on capturing, transporting, and storing molecules, producing hydrogen, and sourcing lower-carbon-intensity molecules. It is rapidly expanding its business in these areas with a potential market value of over $6 trillion by 2050.

Carbon Capture and Storage

Exxon’s acquisition of Denbury Inc. is poised to give a major boost to projects and open new opportunities along the U.S. Gulf Coast and beyond. Denbury’s 1,300 miles of CO2 pipelines, primarily in Gulf Coast states, and its strategically located assets are ideal for combating emissions.

Overall, this acquisition supports efficient carbon capture and storage and benefits multiple low-carbon businesses. The goal is to reduce emissions by over 100 MMT annually faster and cost-effectively.

KNOW MORE: Exxon Buys CO2 Pipeline Operator, Betting $5B on Carbon Capture 

Exxon’s CCS portfolio also includes partnerships with the companies mentioned in the image:

source: ExxonMobil

Hydrogen

ExxonMobil uses hydrogen extensively in its refining and chemical plants and plans to expand this use. In Baytown, Texas, the company is building the world’s largest low-carbon hydrogen production facility. This plant will produce 1 billion cubic feet of hydrogen daily, enough to power 1.5 million homes.

The facility will capture over 98% of CO2, about 7 MMTs annually, and provide clean hydrogen to Gulf Coast industrial customers and Baytown facilities. The project, using certified lower-emission natural gas from the Permian Basin, is expected to start in 2028.

Looking ahead, ExxonMobil is exploring technology advancements and transport solutions. It participates in initiatives to advance low-carbon hydrogen and address blending hydrogen into natural gas pipelines. The company is also collaborating with the MIT Energy Initiative to develop a carbon life-cycle tool that will help policymakers design effective emission-reducing technologies.

Lithium

In a new development last November, Exxon announced plans to produce lithium carbonate for EV batteries using direct lithium extraction (DLE) technology in southern Arkansas. The first production is set to begin in 2027, and the product will be branded as Mobil Lithium. This significant achievement in energy transition will also advance U.S. climate policy while minimizing environmental impacts.

Lower-Emissions Fuels

Lower-emission fuels, including biofuels from plants and synthetics made from hydrogen and CO2, produce fewer emissions than traditional fuels. They offer high energy density for heavy trucks, with renewable diesel reducing carbon emissions by up to 70%. Demand is expected to grow significantly, especially in aviation, marine, and heavy-duty trucking, with projections reaching nearly 9 million oil-equivalent barrels per day by 2050.

The company is using the latest technology to expand lower-emission fuels and innovating next-generation options through its Low Carbon Solutions business. Some remarkable efforts include integrating biomass-based fuel production with carbon capture and exploring natural gas conversion into methanol-based fuels.

Current initiatives feature expanding renewable fuel production at the Strathcona, Canada refinery, and delivering certified sustainable aviation fuel (SAF) to Changi Airport in Singapore as part of a pilot project.

From the report, it’s clear that ExxonMobil maintains a leading position in profits and production. At the same time, the company demonstrates a strong commitment to environmental solutions and efforts to combat emissions.

FURTHER READING: Chevron Q2 Results: Challenges and Decline in Performance

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Who Verifies Carbon Credits?

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Carbon Credits Verification Explained.

Here’s a new money-making model for you.

Plant a small forest in your backyard. Call it “afforestation” and “carbon sequestration.” Calculate how many tons of carbon dioxide will be locked away in your forest over its lifetime. Then sell those carbon credits to companies and private entities who are still busy pumping CO2 into the air.

Congratulations, you’ve just marketed carbon offsets!

It’s not quite that easy, of course, but in the race to reduce their carbon footprint, companies are realizing that the carbon offset market is largely unregulated.

The market for carbon offsets is voluntary – there’s no government agency setting a standard emission reduction that must be met for eligible project. There’s not even an established criteria for what makes a viable carbon offset project.

Take a quick scan over the voluntary carbon markets out there and you’ll see a dizzyingly broad range of projects on offer. Renewable energy projects are always popular, as well as projects that lock carbon emissions away. You’ll also find forest management projects. Biogas projects. Water quality projects. The list goes on and on, with some of the projects seeming more and more unrelated to actual greenhouse gas emissions reductions.

A Wild West of Carbon Credits

Technically speaking, carbon credits are government-issued carbon allowances. Under the right conditions, they can be bought and sold in different exchanges. But participation is limited to entities (typically companies) in areas with an Emissions Trading Scheme (ETS). In the US, only California has a state-administered carbon trading program.

That leaves a growing demand for companies to take responsibility for their greenhouse gas emissions, but no formal market to meet that demand.

That’s where the idea of carbon offsets comes in.

Carbon offsets are carbon credits traded on the voluntary market. By investing in carbon reductions projects, companies can “offset” the carbon they produce.

Offsets don’t fall under existing government regulation. They’re an entirely natural market response to a new demand.

But that does raise an important question: who verifies carbon credits? And what about carbon prices?

Without a government regulator, the market is left to sort out its own verification activities. In a new and growing market, that means a lot of uncertainty, but also an immense opportunity for any entity who can oversee other carbon offset providers.

Market-Led Verification

Think of “third-party verification,” and you probably think of some bureaucratic seal of approval. That’s how most regulation works. Government sets standards, and administers those standards through agencies that police different sectors of the market.

But verification isn’t only about meeting certain regulatory requirements.

Verification ensures that consumers receive proper value for their money.

In the open market, the job of ensuring proper value – verification – often falls to a third party. That third party often has an outsize influence in the development of the broader market, and the voluntary carbon market is no exception.

Carbon credit verification is a rigorous process that involves various steps to ensure the legitimacy of the credits. The verification process typically starts with the project developers who implement carbon reduction activities and generate the credits. They need to provide evidence of the carbon reduction, such as monitoring data, project reports, and other relevant documentation.

Once the project developers have collected the relevant data, it is submitted to a third-party verifier who assesses the data and ensures that the project meets all the requirements of the chosen carbon credit standard. The verifier will also check for any errors or inconsistencies in the data and verify the accuracy of the project report. If the verifier is satisfied that the project meets all the requirements, it issues carbon credits, which can be traded on the carbon market.

Multiple Market Approaches

Need a carbon offset? You’ll have two options when it comes to purchasing them.

You can buy carbon offsets individually, selecting the offsets and the price you pay for them. Sites like Nori and GoldStandard leave much of the verification process to the consumer. It’s up to you to examine the projects and select the ones you think will provide the greatest impact.

Voluntary offset market sites like these do some verification on their own, of course. By deeming a particular program worthy of being offered on the site, Nori and GoldStandard are implicitly verifying the programs.

Other offset markets provide offsets in a portfolio. By bundling offsets from different projects together, companies like Native can sell a wide range of offsets in one package. It’s a bit of verification through diversification – not every project will be as successful as others in actually reducing CO2 emissions. But by purchasing offsets that cover more than one project, investors can be confident that stronger offsets will offset weaker ones.

Building A New Verification Ecosystem

But what goes into a carbon offset? Who calculates the tonnes of carbon locked away in a given program? Who measures the carbon emissions reductions?

The smart carbon offset provider realizes that the offset market marks a golden opportunity to establish itself as the ultimate verification tool. Any company that can claim to have the best verification process can position itself to lead the rapidly-growing offset market for years to come.

The proof is in the pudding. The company that can prove its carbon offsets contributed to sustainable development benefits will have a notch in its belt. Anyone who can demonstrate clearly-achieved GHG emission reductions will be able to use that success to attract more investors to its projects.

In the voluntary carbon market, better verification leads to demonstrable results. And in a world increasingly aware of environmental damage, demonstrable results will lead to greater sales of carbon offsets.

One example of a company attempting to do just that is Verra.

Verra markets itself not as a seller of carbon offsets, but as a company that provides reliable carbon standards.

What sets Verra and its competitors apart is their efforts to provide internal offset verification services.

In Verra’s case, that means recruiting, training, and maintaining a network of auditors who can follow up on any Verra-approved offset programs. It’s in-house offset project verification, trying to ensure that a ton of carbon offset is an actual ton of carbon gone. That’s easier said than done, and it requires an extensive network.

But with a market growing as rapidly as the carbon offset market, the potential prize is worth it.

What Verra and others are pushing for is the chance to be the de facto verification body for an entire industry.

That push may seem to run against the market, but consumers will have the last word as always. The difference between carbon offset projects may not be apparent immediately, but as the market grows it will be easier to choose offsets based on reputation.

A standard for carbon offsets doesn’t need to be government-issued.

The markets can and will set their own standards.

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Uber’s Q2 Results Are Strong But Do Its Net Zero Efforts at Par?

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Uber reported impressive second-quarter earnings, significantly surpassing Wall Street expectations. Coupled with substantial investments in zero-emission vehicles and robust environmental and carbon emission reduction commitments, can Uber’s advancements drive it to the forefront of sustainable transportation solutions?

Uber’s Q2 Earnings Beat Wall Street Expectations

Uber reported impressive second-quarter earnings on Tuesday, surpassing Wall Street estimates and causing the stock to rise about 6% at market open.

The company reported earnings of 47 cents per share, significantly higher than the 31 cents expected by analysts. Uber also posted better-than-expected revenue of $10.7 billion, slightly above the expected $10.57 billion. This represents a 16% increase from the $9.23 billion reported in the same quarter last year.

Uber reported a net income of $1.02 billion for the quarter, which included a $333 million pretax benefit from revaluations of Uber’s equity investments.

When it comes to strategic partnerships, Uber partnered with Instacart, adding a “restaurants” tab to the grocery delivery app, allowing users to order from restaurants with deliveries fulfilled by Uber Eats. Moreover, in July, Uber and Chinese electric vehicle maker BYD announced a collaboration to bring around 100,000 EVs to Uber drivers in Europe and Latin America. The companies also plan to work on future autonomous-capable vehicles for the Uber platform.

While BYD vehicles are not available in the U.S., Uber offers various incentives to encourage drivers to switch to battery-electric vehicles like those from Tesla, instead of using gas-powered cars.

This strong performance and achievements highlight Uber’s efforts to lead in the mobility and delivery sectors while transitioning towards more sustainable transportation solutions, as evidenced by its carbon emission reduction initiatives and net zero goals. 

Uber’s Science-Based Net Zero Targets and Environmental Commitments

Uber has committed to ambitious science-based targets to significantly reduce its greenhouse gas (GHG) emissions. The company aims to cut absolute Scope 1 and 2 emissions by 42% by 2030 and by 90% by 2040, using 2021 as the base year. 

As seen in the chart below, the mobility company’s carbon emissions are jumping to almost 32 million metric tons in 2023.

Data from Uber 2024 ESG Report

Additionally, Uber plans to decrease Scope 3 emissions from the use of sold products by 34% per service kilometer by 2030 and by 97% by 2040. These goals align with Uber’s broader objective of achieving net zero emissions across its entire value chain by 2040.

Investments in Zero-Emission Vehicles (ZEVs)

To support its transition to a more sustainable future, Uber is investing $800 million to help drivers switch to zero-emission vehicles (ZEVs). By the end of 2023, the company had allocated or invested over $439 million. This investment aims to ease the financial burden on drivers and accelerate the adoption of ZEVs across Uber’s platform.

Advocacy and Policy Support

Uber recognizes that the challenges of climate change and waste management cannot be tackled by any single entity alone. Thus, the company advocates for policies that support a shared agenda of economic, environmental, and equitable progress. 

Historically, the growth of battery EV markets and sustainable packaging solutions has been driven by strong government policies.

SEE MORE: Is the EV Market’s Momentum Slowing?

Uber’s ambitious targets—achieving a 100% zero-emission platform in the US, Canada, and Europe by 2030, and globally by 2040—reflect its commitment to science-based 1.5 degree–Celsius climate targets.

To achieve these goals, Uber supports comprehensive policy frameworks in five critical areas:

ZEV Supply
ZEV Incentives 
Battery EV Charging 
Urban Access for Green Vehicles
Responsible Packaging and Infrastructure

Promoting ZEV Access and Affordability

Uber is working to make ZEVs more accessible and affordable through various partnerships and programs. 

For instance, Uber has negotiated exclusive deals with leading companies like Hyundai, Kia, Nissan, Renault, MG, and Tesla. These partnerships aim to bring the upfront cost of an EV closer to that of an internal combustion vehicle.

The mobility company is also working with fleet partners to accelerate the adoption of EVs. In 2023, Uber signed a memorandum of understanding (MoU) with Tata Motors to bring 25,000 EVs to the platform in India by 2025. The company is also expanding its network of fleet partners, including a partnership with Zypp Electric to deploy 10,000 electric two-wheelers by 2024.

Boosting Consumer Access to Sustainable Rides

Uber offers a wide range of green and car-free ride options, providing access to no- and low-emission rides in over 250 metropolitan markets. The use of the following riding platforms (in Latin America) has increased by more than 340% year over year.

Uber Green: Uber Green is the most widely available on-demand mobility solution for no- or low-emission rides. It is offered at about the same price as UberX. 
Uber Comfort Electric: Uber Comfort Electric allows riders to request a trip in a premium zero-emission vehicle (ZEV), such as a Tesla or Polestar. 
Uber Planet: Uber Planet, pioneered in Latin America, allows riders to offset the carbon footprint of their trips through the app. Riders pay a slight price surcharge on the trip fare to offset their carbon footprint with carbon credits invested in internationally certified projects.

Uber’s expansion of these sustainable ride options aims to enhance consumer access to environmentally friendly transportation choices and reduce carbon emissions globally.

Relying on High-Quality Carbon Offsets

While Uber aims to achieve net zero emissions by 2040 with minimal reliance on carbon offsets, the company recognizes that strategic use of high-quality offsets may be necessary for hard-to-abate emissions. Uber’s approach to carbon offsets focuses on:

Scope 1 & 2 Emissions

Offsets are used where emissions are currently difficult or impossible to eliminate, such as in power generation and natural gas use. The company prefers alternatives like virtual power purchase agreements or 100% renewable power when available and affordable.

Consumer Scope 3 Emissions

Carbon offsets address emissions in markets lacking viable low-carbon solutions, including parts of Africa, Central and Eastern Europe, India, Latin America, the Middle East, and South Asia. This also applies to businesses like Uber Freight or Uber CarShare, where emissions are embedded rather than usage-based.

Uber’s strong Q2 performance, combined with substantial investments in zero-emission vehicles, underscores the company’s commitment to leading the mobility sector while pursuing carbon emission reduction goals. As the company continues to enhance its sustainable ride options and advocate for supportive policies, it can significantly help drive the transition towards a greener future.

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Lucid Gets $1.5 Billion from Saudi: Could This Be A New Era for Electric SUV?

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Lucid Motors has secured an additional $1.5 billion investment from Saudi Arabia, as announced alongside the company’s Q2 2024 financial results. This injection of funds aims to boost the production of Lucid’s new electric vehicle (EV), the Gravity. It will also expand the company’s factory in Saudi Arabia, which is expected to have an annual capacity of 150,000 vehicles.

The investment comes from the American automaker’s major shareholder, Ayar Third Investment Co., an affiliate of Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF).

Following the announcement, Lucid’s shares rose about 6% in extended trading, despite a 3.9% drop during regular trading hours. Tesla’s rival also reported its second-quarter financial results for the period ending June 30, with revenue of $200.6 million and the delivery of 2,394 vehicles. The company ended the second quarter with about $4.28 billion in total liquidity.

Lucid Takes A Financial Boost

PIF’s investment includes $750 million in convertible preferred stock through a private placement and a $750 million unsecured delayed draw term loan facility, subject to certain conditions. This financing aligns with PIF’s strategic goal to become a global investment powerhouse and drive Saudi Arabia’s economic transformation by creating new sectors and opportunities that can shape the future global economy.

Half of this investment will be provided as a loan. In contrast, the other half will be exchanged for convertible preferred stock by Ayar Third Investment. This marks the second investment from Saudi Arabia this year, bringing the total investment in Lucid to about $8 billion, with the country’s stake in Lucid now at about 60.

Lucid CEO Peter Rawlinson stated that these new funds will ensure liquidity at least until the fourth quarter of 2025. 

The Saudi plant, which began operations last fall, currently assembles semi knocked-down units of the Air sedan at a rate of 5,000 units annually. The long-term goal is to achieve full production of Lucid vehicles at an annual rate of 150,000 units. 

Meanwhile, Lucid’s primary facility in Casa Grande, Arizona, also responsible for Air sedan production, aims to reach an annual capacity of 365,000 units once fully expanded. The Arizona plant will also begin producing the Gravity SUV later this year.

Fueling Lucid’s Ambitious EV Expansion Plans 

Despite these ambitious plans, Lucid still faces significant challenges in scaling up production. The company manufactured only 2,110 vehicles in the second quarter and is on track to produce about 9,000 vehicles this year, compared to 8,428 vehicles produced last year. 

Compared to the EV giant, Tesla, the full EV maker reported delivering 443,956 vehicles in Q2 2024 and produced 410,831 vehicles. Globally, EV sales reached an all-time high in the second quarter of 2024, with a 19% increase from the first quarter, according to New AutoMotive’s Global Electric Vehicle Tracker. 

INTERESTING READ: EV Wars and Breakthroughs: BYD to Overtake Tesla, CATL’s New Battery With 1.5M KM Range

Moreover, nearly 2.6 million EVs have been sold globally since May 2024, with China’s domestic market driving much of this growth. 

Since 2021, first-quarter EV sales have typically accounted for 15-20% of total global annual sales, per the International Energy Agency data. Based on this trend, combined with policy momentum and typical seasonality in EV sales, estimates suggest that electric car sales could reach around 17 million in 2024. 

Electric Car Sales, 2012-2024

This projection indicates robust growth for a maturing market, with 2024 sales expected to surpass those of 2023 by more than 20%, resulting in EVs comprising more than one-fifth of total car sales.

In the United States, EV sales could rise by 20% in 2024 compared to the previous year, according to the IEA. This increase translates to almost half a million more sales relative to 2023. Despite a rocky end to 2023 for EVs in the U.S., sales shares are expected to remain strong in 2024, with projections indicating that around one in nine cars sold will be electric throughout the year.

More EV models become available but the trend is towards the bigger ones. The number of available EV models is nearing 600, with ⅔ of these being large vehicles and SUVs, IEA reported.

Scaling New Heights: Lucid’s Strategic Growth in the EV Market

The Gravity was officially unveiled in November, with Lucid stating it “heralds the dawn of a new era for electric SUVs” by offering over 440 miles of range. This full-size electric SUV features a luxurious interior with three rows, providing ample room for seven adults and their belongings. 

The luxury electric SUV is powered by Lucid’s next-generation technology, which is an evolution of the award-winning tech found in the Air sedan.

Lucid’s CEO, Peter Rawlinson, emphasized that the Gravity SUV represents a significant advancement in the company’s technology and design. Despite its long-range capabilities, the Gravity’s battery pack is “a little more than half the size of some of our battery-hungry competitors.” This is crucial as the market for lithium, a key element that powers EV batteries, is in limbo.  

READ MORE: Lithium Markets in Limbo: Next Leg Up or Down?

Lithium prices keep dropping with no quick recovery in sight per the experts advice. BloombergNEF predicts that low lithium battery prices will persist for several years, significantly impacting the automotive industry. This extended period of affordability is expected to drive further adoption of electric vehicles. 

As lithium battery costs remain low and with the significant investment announced, the economic feasibility of Lucid’s electric SUV holds strong. It strengthens Lucid’s financial position and supports its mission to accelerate the global shift towards sustainable transportation and energy. 

The post Lucid Gets $1.5 Billion from Saudi: Could This Be A New Era for Electric SUV? appeared first on Carbon Credits.

Chevron Reports Lower Q2 Earnings! What About Its Emissions?

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Chevron, the leading oil and natural gas giant’s Q2 results indicated a decline in performance. The company’s profits fell due to operational and market challenges, reflecting the difficulties it faced during the quarter. However, its global production increased. But how about its emissions and zero goals? Let’s discover

Chevron’s Profits Decline Amid Production Growth

Chevron Corporation’s second-quarter 2024 earnings totaled $4.4 billion, a decrease from $6.0 billion in the same period in 2023. Simply put, the company’s profit slumped 19% this year.

CEO Michael Wirth said, “This quarter was a little light due to some operational and other discrete items that impacted results.”

This drop reflects reduced margins on refined product sales, the absence of favorable tax items, and adverse foreign currency effects that substantially reduced earnings by $243 million. Adjusted earnings were $4.7 billion ($2.55 per share), compared to $5.8 billion ($3.08 per share) last year.

Despite this, Chevron saw a notable 11% increase in global production, driven by the successful integration of PDC Energy and strong performance in the Permian and DJ Basins. The company also expanded its exploration footprint through agreements in Namibia, Brazil, Equatorial Guinea, and Angola.

In terms of financial activities, Chevron allocated $6.0 billion to shareholders during the quarter, including $3.0 billion in dividends and $3.0 billion in share repurchases. Cash flow from operations remained steady, supported by higher dividends from equity affiliates and reduced working capital.

Looking ahead, Chevron’s upcoming dividend of $1.63 per share underscores its commitment to returning value to shareholders amid operational growth and strategic expansions in key global markets.

Reuters reported that Chevron is counting on the Hess acquisition to secure a foothold in Guyana, which holds the largest oil discovery in nearly two decades. Subsequently, the company also aims for the deal to offset risks from its underperforming oil projects in Australia and Kazakhstan, where operational issues have again affected production and delayed maintenance work into the third quarter.

MUST READ: Chevron Finds Global Carbon Pricing Key for Low-Carbon Investments

Is Chevron’s Emission Reduction Plan Enough?

Chevron plans to allocate $8.0 billion to lower carbon energy investments from 2021 through 2028. This includes renewable fuels, carbon capture, offsets, hydrogen, and advanced technologies to enhance production and supply capabilities Additionally, the company will invest $2.0 billion in carbon reduction projects over the same period.

In 2023, Chevron’s emissions amounted to 745 million metric tons of carbon dioxide equivalent (MtCO₂e). Quite sadly, Chevron’s emissions had been steadily rising.

Image: Annual greenhouse gas emissions released by Chevron from 2016 to 2023 (in million metric tons of CO₂ equivalent)

Chevron’s Net Zero 2050 Aspiration

Chevron aims for net zero upstream Scope 1 and 2 greenhouse gas emissions by 2050 on an equity basis. Achieving this goal hinges on significant technological advances, including commercially viable low- or non-carbon energy sources. It also depends on supportive policies, successful carbon capture and storage negotiations, and the availability of cost-effective carbon credits.

2028 targets to lower the carbon intensity of operations

71 g CO₂e/MJ portfolio carbon intensity (Scope 1, 2, and 3)
24 kg CO₂e/boe (Barrel of Oil Equivalent) oil carbon intensity (Scope 1 and 2)
24 kg CO₂e/boe gas carbon intensity (Scope 1 and 2)
36 kg CO₂e/boe refining carbon intensity (Scope 1 and 2)

With this plan, the oil giant envisions to top the list of carbon intensity mitigators in oil, products, and natural gas.

GHG Emission Management

Chevron actively reduces carbon intensity by refining its portfolio, enhancing operations, and using its Marginal Abatement Cost Curve (MACC) process. It focuses on optimizing carbon reduction opportunities and integrating GHG mitigation technologies throughout its operations. The MACC process has identified over 150 GHG abatement projects.

This year Chevron plans to invest more than $600 million to advance these projects. From 2021 to 2028, Chevron expects to invest approximately $2 billion in these initiatives, aiming for around 4 mts of annual emissions reductions when completed.

The company targets key areas such as energy management, methane management (including venting, fugitive emissions, and flaring), CCUS, and offsets. Supportive policies like carbon pricing and effective carbon reporting are also a part of its GHG reduction protocol.

Chevron’s significant GHG mitigation projects include replacing diesel with alternative fuels in the Permian Basin and cutting 270,000 tons of CO2e since 2020. In France, the Oronite plant’s agreement with BioSynergy will meet 40% of its steam needs with biomass and solid recovered fuel, reducing CO2 emissions by 25,000 tonnes annually.

Combating Methane Emissions

Chevron has set a methane emissions performance goal of 2.0 kg CO₂e/boe upstream methane intensity by 2028. Since 2022, the company has designed new upstream facilities to avoid routine methane emissions. Notably, it has tested 14 advanced detection technologies since 2016, including aircraft-based gas mapping and satellite imaging.

Last year, Chevron contracted GHG Sat to monitor 18 onshore assets globally. Despite progress, accurate methane quantification remains challenging. To overcome these challenges, it has collaborated with third parties to enhance methane detection and measurement. Key partnerships are with Veritas and the Oil and Gas Methane Partnership.

Chevron’s Global Presence in Renewables 

By 2030, Chevron targets 100 mbd of renewable fuels, 25 mmtpa in offsets and CCUS, and 150 mtpa in hydrogen production capacity.

Renewable Fuels and Natural Gas

Chevron is advancing its renewable fuels to cut the carbon intensity of transportation. By 2030, Chevron aims for a production capacity of 100 mbd, including renewable diesel and sustainable aviation fuel. It is expanding its renewable diesel capacity with a new project in Louisiana and investing in feedstock development in Argentina.

The company’s renewable natural gas (RNG) projects mainly involve capturing dairy methane and turning it into useful fuel. It has partnered with Brightmark LLC to fund and operate biomethane projects and recently acquired Beyond6, LLC to expand its CNG stations.

A significant achievement in this space is its growing lower-carbon hydrogen and ammonia business. The company is working on the Advanced Clean Energy Storage Project (ACES I) in Utah and developing hydrogen infrastructure in the Gulf Coast region.

CCUS and Emerging Technologies

Chevron’s CCUS profile is quite impressive. Prime projects include Bayou Bend in Texas and the Gorgon project in Australia, one of the largest integrated CCS projects globally. Chevron is also investing in soil carbon projects with Carbon Sync to boost carbon sequestration.

READ MORE: Chevron Allots $26M to Carbon Capture and Storage in Australia

In Nevada, it is investing in geothermal projects with Baseload Capital, marking its entry into low- and medium-temperature geothermal energy. This marks a 100% commitment to reducing carbon emissions across major industries and hard-to-abate sectors,

Overall, the investment plan to achieve its net zero goals looks promising and we hope Chevron’s next quarter will bloom bright!

The post Chevron Reports Lower Q2 Earnings! What About Its Emissions? appeared first on Carbon Credits.

Is Amazon’s Carbon Goal Enough to Offset Its Financial Hiccups?

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Amazon’s latest earnings report reveals a mixed bag: while the retail giant fell short of revenue and advertising expectations, its cloud business, AWS, exceeded forecasts.

As the company navigates these financial setbacks, its commitment to environmental sustainability stands out. Amazon is ramping up its efforts to tackle its carbon footprint and achieve net zero carbon by 2040, even as it grapples with some challenges in its operations.

Earnings Snapshot: AWS Shines Amid Financial Hiccups

Amazon reported Q2 revenue of $148 billion, slightly under the $148.8 billion forecast, with its advertising segment also missing expectations at $12.8 billion versus $13 billion. However, its cloud business, Amazon Web Services (AWS), exceeded expectations with $26.3 billion in revenue. 

CFO Brian Olsavsky noted AWS is on track for over $105 billion annually and that Amazon has invested over $30 billion in the first half of the year to support AI and cloud service expansion, with increased investments expected in the second half.

Despite Amazon reporting earnings per share (EPS) of $1.26—beating estimates of $1.04 and nearly doubling profits from the previous year—investors focused on the report’s weaknesses.

Amazon’s stock dropped over 11% in early trading on Friday after its Q3 forecast missed expectations. The company projected sales of $154 billion to $158.5 billion, below the analyst forecast of $158.43 billion. Expected operating income of $11.5 billion to $15 billion fell short of the $15.2 billion anticipated. 

Behind the financial misfits lies the retail giant’s success in tackling its environmental and carbon footprint. 

Amazon’s Carbon Footprint Progress and Challenges 

In 2023, Amazon reduced its absolute carbon emissions by 3%, driven by an 11% decrease in Scope 2 emissions from electricity and a 5% drop in Scope 3 emissions. However, Scope 1 emissions, related to direct operations, increased by 7% due to higher transportation fuel use.

Despite these increases, Amazon’s carbon intensity improved for the fifth consecutive year, dropping 13% from 2022.

Chart from Amazon’s 2023 Sustainability Report

Amazon’s Scope 1 emissions, which come from its logistics and transportation fleet, rose by 7% and now represent 21% of its total footprint. This increase is linked to higher package volumes and the growth of Amazon’s logistics network. Efforts to reduce emissions per package include optimizing packaging through AI and reorganizing delivery routes to cut down on travel distances, saving nearly 16 million miles in 2023.

For Scope 2, which covers emissions from electricity used in Amazon’s facilities, there was an 11% decrease, representing 4% of the total footprint. This reduction was achieved by using renewable energy sources, including wind and solar. 

In 2023, Amazon matched 100% of its global electricity consumption with renewable energy—seven years ahead of its 2030 target. The company’s renewable energy portfolio expanded to 28 gigawatts, making Amazon the largest corporate buyer of renewable energy for the fourth consecutive year.

READ MORE: Eureka Moment! Amazon Hits 100% Renewable Energy Goal 7 Years Ahead

Scope 3 emissions, which include those from supply chain activities, decreased by 5% and account for 75% of Amazon’s total carbon footprint. This reduction resulted from improvements in building construction practices and a shift toward using Amazon’s logistics providers. 

The online retailer is focusing on reducing embodied carbon in construction by using lower-emission materials, resulting in a decrease of 79,500 metric tons of CO2e from new projects.

Amazon’s Bold Strategy Towards Net Zero

Amazon is committed to achieving net zero carbon emissions by 2040 through a multi-faceted approach involving investment, innovation, and collaboration. The company’s strategy includes reducing its carbon footprint, engaging with suppliers, and investing in carbon-neutralization and carbon-free energy technologies.

At the end of 2023, The Climate Pledge, an initiative Amazon co-founded, included 473 signatories aiming for net zero carbon emissions by 2040. The pledge has seen increased collaboration, with five new joint projects launched in 2023. Amazon supports this effort through its $2 billion Climate Pledge Fund, investing in breakthrough technologies that can lower the cost of decarbonization.

Carbon Neutralization

Amazon’s priority is to eliminate emissions within its operations and invest in carbon-neutralization efforts. This includes reducing emissions through targeted investments and partnerships, focusing on three key areas: 

reducing deforestation, 
advancing nature-based carbon removal, and 
scaling up carbon removal technologies. 

The company engages in initiatives such as the Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition, which mobilizes funds to protect tropical forests and support community programs. Amazon also funds projects like SeloVerde, an AI tool for deforestation traceability, and supports agroforestry projects in the Amazon rainforest to enhance carbon storage and community livelihoods.

Carbon-Free Energy

Amazon’s net zero strategy includes transitioning to carbon-free energy sources, such as wind, solar, and nuclear power. The company has set ambitious goals to match 100% of its electricity consumption with renewable energy and invest in wind and solar capacity equivalent to the energy used by its Echo, Fire TV, and Ring devices. 

Amazon’s efforts extend to energy efficiency, with innovations aimed at optimizing operational energy use and reducing energy consumption. The company is also expanding battery storage to support grid decarbonization and exploring diverse carbon-free energy sources to ensure a resilient and sustainable energy supply.

Supplier Engagement and Technology Investment

A significant part of Amazon’s strategy involves working with suppliers to reduce emissions across the supply chain. The retail and cloud giant has identified its highest-emitting suppliers, representing over 50% of its Scope 3 emissions, and expects them to provide decarbonization plans. 

The company has launched the “Amazon Sustainability Exchange,” a platform to share resources and guidelines to help other companies achieve net zero carbon emissions. This engagement is crucial as Scope 3 emissions are beyond Amazon’s direct control but play a significant role in the overall carbon footprint – over 50% of Scope 3 emissions.

Amazon continues to invest in emerging technologies to advance its sustainability goals. This includes supporting direct air capture (DAC) technologies that remove CO2 from the atmosphere and investing in modular DAC systems to drive down costs and scale up carbon removal efforts. 

Overall, behind financial hiccups, Amazon continues to invest in carbon abatement projects and innovative technologies, such as electric vehicles and energy-efficient chips, to drive long-term decarbonization and enhance sustainability across its operations.

SEE MORE: Amazon’s Own Carbon Offset Standard Sparks Concerns Over Market Confusion

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Is Direct Lithium Extraction the Key to Solving the Lithium Shortage Crisis?

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The rise of Direct Lithium Extraction (DLE) technology promises to open up new sources of lithium supply this decade, potentially helping to avert a forecasted shortfall. According to a new Benchmark special report, DLE represents a group of technologies that selectively extract lithium from brines. This novel technology offers a significant shift in the lithium supply landscape.

What is Direct Lithium Extraction?

DLE is a well-established technology with operational projects in China and South America. The process begins with extracting brine from aquifers, which is then transported to a processing unit. Here, lithium is selectively extracted using a resin or adsorption material, while the spent brine is reinjected into the aquifer, ensuring no depletion or environmental damage. 

Image from Cleantech Lithium website.

The resin captures or adsorbs lithium chloride (LiCl) from the brine. Then the captured lithium is stripped with water, creating a lithium eluate. This eluate undergoes further concentration through reverse osmosis and mechanical evaporation before being processed into battery-grade lithium using industry methods.

One of the key advantages of DLE is its ability to reduce the environmental impact compared to traditional extraction methods. Conventional techniques often lead to soil degradation, water pollution, and destruction of habitats and biodiversity. In contrast, DLE minimizes these issues by avoiding extensive evaporation ponds and using selective extraction methods.

Moreover, DLE technologies help lower the carbon footprint of lithium extraction by reducing energy consumption and greenhouse gas emissions. By employing more efficient and targeted extraction methods, DLE significantly cuts the energy required compared to traditional techniques.

This efficiency contributes to the decarbonization of the energy sector, making DLE a crucial technology for reducing the overall environmental impact of lithium production.

COMPANY SPOTLIGHT: The Fastest Growing North American Lithium Junior 

Current and Future DLE Production

Currently, there are 13 operational DLE projects projected to produce about 124,000 tonnes of lithium chemicals in 2024. By 2035, DLE is expected to contribute 14% of the total lithium supply, amounting to around 470,000 tonnes of lithium carbonate equivalent (LCE), as per Benchmark’s Lithium Forecast. 

While most of this supply will come from continental brines, geothermal and oil fields could contribute 9% and 14% respectively.

CHECK OUT live lithium prices here.

The Role of DLE in New Brine Projects

Almost 75% of new brine projects are expected to use some form of DLE. This highlights the growing importance of unconventional lithium sources and the expanding ecosystem of new players in the lithium value chain, especially oil companies that bring substantial capital and expertise.

Despite its potential, DLE’s path to commercialization faces several challenges, including:

issues with scalability, 
inflationary pressures, and 
delays at new brine projects. 

Technical risks also pose hurdles for new investors. Benchmark’s DLE special report outlines various DLE technologies, including adsorption, ion exchange, solvent extraction, and membranes, with adsorption being the most widely adopted and best-established, particularly in China.

Each brine source is unique in terms of impurity levels and lithium concentration, meaning there is no ‘one-size-fits-all solution’. Consequently, each DLE solution must be tailored to the specific environmental and economic conditions of the project.

Unlocking New Sources: Oil-field Brines

DLE technology has the potential to unlock previously undeveloped sources of lithium, such as petro brines and geothermal deposits, by achieving recovery rates of 80-90% compared to the current evaporation yields of 20-50%. This is particularly significant for “unconventional” brine resources in western jurisdictions, aligning with the political priorities in the US and European Union to build localized and diversified streams of critical minerals.

DLE’s potential is attracting significant interest from major players, including oil and gas companies. For example, Standard Lithium’s Stage 1A project in Arkansas could be the first petro brine project to come online in 2026. It has an initial production of 5,000 tonnes per year. 

Additionally, Exxon Mobil has signed a non-binding memorandum of understanding (MOU) with battery producer SK On for the supply of up to 100,000 tonnes from its DLE lithium project in Arkansas.

Despite the enthusiasm, DLE projects face significant capital and operating cost challenges. These projects have seen substantial cost increases as they advance and feasibility studies are updated.

Rising global inflation rates, along with higher equipment, utility, and labor costs, have driven these increases. For example, early-stage DLE projects have an average capital intensity of $37 per kilogram of lithium carbonate equivalent (LCE), while advanced projects average $60 per kilogram of LCE.

Given these challenges, Direct Lithium Extraction is unlikely to be a short-term solution for the lithium industry. Benchmark does not believe that DLE technology alone can bridge the structural deficits in the lithium market. However, it remains a promising avenue for expanding lithium supply in the long run.

READ MORE: Lithium Markets in Limbo: Next Leg Up or Down?

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