Many companies have turned to cheap offsets or junk credits, resulting in a significant portion of their credits being classified as high-risk. So, what makes these offsets low-quality? These credits often come from forest conservation and renewable energy projects, which are prone to issues like over-crediting and exaggerated claims of emission reductions. Let’s deep dive into what’s happening in the era of carbon credits.

Downfall of Industry Standards Amid Rise of Low-Quality Carbon Offsets

Offsets primarily come from two project categories: avoidance and removals. Avoidance projects, such as those focused on forest conservation and renewable energy, make up over 97% of the credits retired by these companies. However, these projects often fail to deliver genuine emissions reductions.

Many offsets come from redundant projects that do not meet the industry standards. This reliance on outdated credits further undermines the credibility of companies’ net-zero claims.

Carbon removal projects, which capture and store CO2, account for only 2.3% of the offsets retired. Companies show little interest in shifting towards these potentially more effective solutions. Only a few firms, like Audi and Takeda, have significantly increased their use of removal credits.

Last year an intriguing article by The New Yorker, exposed some major issues. For example, the Kariba project in Zimbabwe, which claimed to prevent deforestation and earned nearly $100 million, has been criticized for not achieving its goals. A report by Bloomberg also revealed that South Pole, cut ties with the project, potentially leading to its collapse. This situation could undermine the climate claims of big corporations like Volkswagen and Nestlé.

Companies are reconsidering their trust on offsets. A survey from late 2022 found that 40% of corporate respondents were worried about the reputational risks associated with carbon offsets. As a result, firms such as Shell, Nestlé, EasyJet, and Fortescue Metals Group have started to distance themselves from offsets and their associated claims of carbon neutrality.

Study the graphs to understand the absolute volumes of all offsets retired by each company and relative shares of avoidance or removal offsets retired over 2020–2023source: Nature

READ MORE: How Effective Are Carbon Credits in Corporate Net Zero? SBTi Speaks

Are Junk Carbon Offsets Masking Climate Goals?

Interestingly, Bloomberg highlighted the Kyoto study which pointed out that many offsets come from outdated projects. Furthermore, many corporations are fueling the problem with low-quality carbon credits. These offsets, intended to neutralize emissions by investing in projects like forestry and renewable energy, are failing to deliver real climate benefits. Additionally, around 75% of the credits were linked to projects started before 2016, diminishing their credibility. Many companies opted for the cheapest offsets rather than investing in more effective carbon removal strategies.

The study also revealed that between 2020 and 2023, top companies like Shell, Delta Air Lines, and Chevron purchased mostly ineffective offsets. A staggering 87% of these credits were deemed high-risk, often failing to achieve genuine emissions reductions. This marks a significant blow to the carbon offset market, which is already shrinking due to increasing scrutiny and legal challenges.

False Claims and Exaggerated Results 

Forestry projects, which claim to capture carbon by protecting or planting trees, often fall short. Trees can be prone to wildfires, which release stored carbon back into the atmosphere. For instance, Green Diamond’s Forest carbon projects were ravaged by wildfires, releasing millions of metric tons of stored carbon back into the atmosphere. This problem is not isolated, as similar setbacks occurred in other Pacific Northwest forests.

Despite noble intentions, these projects often fail to compensate for fossil fuel emissions, leading to disbelief in their climate benefits. Furthermore, the benefits of these projects are often overstated. Trees may not be at risk of logging in the first place, making it questionable whether offsets for avoided deforestation are truly effective.

Renewable energy credits face similar issues. With clean energy becoming more cost-effective, the carbon credits often fund projects that would have been built regardless of carbon offset purchases. This raises doubts about whether such credits contribute new value to the global carbon balance. The Integrity Council for the Voluntary Carbon Market (ICVM) found that a significant portion of renewable credits failed to meet reliability standards.

MUST READ: ICVCM Axes Renewable Energy Carbon Credits from CCP Label

Corporate Choices Signal Paradigm Shift and a Weak VCM

For real progress, companies need to focus on directly reducing their emissions rather than relying on dubious offsets. While carbon credits might play a role in a future net-zero world, the current market’s flaws hinder meaningful climate action. Without major reforms, the market might continue with its ineffective and even harmful practices.

Global carbon markets are facing growing scrutiny as more companies question the effectiveness of their offsets. Once hailed as a simple solution to balance out greenhouse gas emissions, offsets are now under fire for failing to deliver promised climate benefits. Subsequently, this also digs out a major problem. It shows how the voluntary carbon market (VCM) is weakened by the demand for low-quality offsets. As companies keep choosing cheap, ineffective options, the real impact of their climate efforts is doubtful. To make a real difference, they should shift to higher-quality carbon removal projects and stick to strict standards.

Carbon Direct’s recent report highlights a significant shift. The media firm conveyed good news that the demand for traditional, riskier credits is falling, while interest in high-quality carbon removal projects is rising. Between 2021 and 2023, purchases of quality-focused removal credits multiplied five times.

Embracing Premium Carbon Credits

Moving on, carbon removal strategies like managed reforestation and biochar sequestration can create high-value credits. However, these methods are still niche and face technical and economic hurdles. For now, most companies prioritize directly reducing their emissions, which is more reliable than depending on questionable offsets to mitigate emissions.

As companies continue to rely on cheap, ineffective options, the true impact of their climate strategies becomes doubtful. This graph further illustrates the contraction in the carbon credit market due to these loopholes.

To see real climate benefits, a shift toward higher-quality carbon removal projects and adherence to strict verified standards is crucial.

For instance, projects must prove that their emission reductions or carbon removals are real, measurable, permanent, additional, independently verified, and unique, as per standards like the Gold Standard and Verified Carbon Standard (VCS). Credits are issued only when these criteria are met. This approach ensures low-quality offsets are discarded, leading to more effective climate action.

FURTHER READING: ICVCM Reveals First CCP-Approved Carbon Credits Worth 27M Carbon Credits

The post The Pitfalls of Low-Quality Carbon Offsets: Are They a Threat to Our Planet? appeared first on Carbon Credits.

According to The Energy Information Administration (EIA), “the US expects renewable energy to grow by 17% to 42 GW in 2024 and make for a quarter of electricity generation.”

In Q2 2024, the renewable energy sector continued to experience significant investment activity, although it showed mixed results in terms of growth compared to previous quarters. The sector secured $1.3 billion in equity funding, reflecting a slight increase from Q1 2024, which saw $1.2 billion. However, this amount is lower compared to some previous quarters in 2022 and 2023, indicating a potential cooling in the pace of investments.

The overall trend in equity funding has seen fluctuations, with peaks in late 2021 and early 2022 when the sector experienced robust investment interest. The Q2 2024 funding level, while steady, is a reminder of the cyclical nature of investment in the sector.

Renewable Energy Deal Activity 

In the renewable energy sector, the average deal size has seen fluctuations over recent years, with a peak at $38.4 million in 2020, followed by a decline to $31.2 million in 2022. It further dipped to $23.3 million in 2024 year-to-date (YTD). Meanwhile, the median deal size has remained more stable, with figures showing $6.5 million in 2020, a slight drop to $5.0 million in 2022, and rebounding to $5.3 million in 2024 YTD. This data highlights a trend of mixed deal sizes ranging from both bigger and smaller deals in the industry over time.

Number of Deals: In Q2 2024, there were 82 deals, a slight decrease from Q1 2024’s 107 deals. This reduction in deal volume suggests a more cautious approach by investors, possibly due to broader economic conditions or market saturation in certain segments of renewable energy.

While the renewable energy sector remains a key focus for investors, Q2 2024 saw moderate investment levels compared to some previous quarters. The sector’s performance may be influenced by external economic factors and shifts in investor strategies.

READ MORE: The Biggest Funding Surges in Renewable Energy and Sustainability Tech 

By Global Region

Analyzing the funding on basis of global region, US is the top player having 41% in renewable shares, followed by Europe and Asia. Other regions, including Canada and all other regions, have remained relatively small contributors, with Canada fluctuating around 4% and other regions around 4-8%.

According to CB Insights, Who Leads the Pack?

1. MN8 Secures $325 Million for Expansion

MN8, one of the U.S.’s largest independent renewable energy companies, closed its first private placement, raising $325 million in April. The funds will support the Company’s expansion and growth plans.

This $325 million investment includes $200 million from Mercuria Energy Group and $125 million from Ridgewood Infrastructure, a top U.S. infrastructure investor. Stockholders will have the option to convert their preferred stock into common stock in the future.

The news release also revealed that, as part of the deal, Mercuria will gain one board seat and an observer seat on MN8’s board, while Ridgewood will receive an observer seat. The partnership will focus on discovering commercial opportunities to promote more sustainable, affordable, and reliable energy systems. It will merge MN8’s renewable energy expertise with Mercuria’s deep knowledge of energy markets.

In May, First Solar, Inc. the. U.S. solar technology firm announced that MN8 Energy LLC has ordered 457 megawatts (MW) of advanced thin film solar modules. This order includes 170 MW of Series 6 Plus bifacial modules and 287 MW of Series 7 modules. The solar modules will be used to power projects across the northeastern and southern United States.

MN8’s 3.2 (GW) portfolio provides renewable energy solutions to over 40 corporations, 70 government entities, and 20 utilities. In the last 12 months, MN8 Energy had revenue of $326.69 million and earned $191.84 million in profits.

2. Tree Energy Solutions (TES) Raises $152 Million to Power Green Energy Projects

Tree Energy Solutions (TES), a global leader in green energy, concluded its third, series C fundraising round, securing $152 million on April 4. The funds will fuel the development of TES’s global green energy projects, with a focus on e-NG (electric natural gas derived from green hydrogen). This round attracted top investors, including Azimut Group, Fortescue, E.ON, HSBC, O.G. Energy, and Zhero.

TES produces e-NG by combining green hydrogen with biogenic or recycled CO2, creating a green alternative to natural gas that uses existing infrastructure for transport and storage. The company has partnered with major energy firms like TotalEnergies, Osaka Gas, and ADNOC to build large-scale e-NG projects across North America, the Middle East, Australia, and Europe.

Additionally, TES is developing a green energy hub in Wilhelmshaven, Germany. This hub aims to decarbonize the German and neighboring energy markets by importing natural gas and e-NG, exporting CO2, and producing green hydrogen and power.

3. Newcleo’s Strategic Shift: Raising Funds and Expanding in Europe

Newcleo, a British nuclear startup, although new has made an impact in this space. The company recently raised around $528 million across three funding rounds, with the latest being a Series B round that secured $94 million in May 2024. They aim to tap into European Union resources by relocating their holding company from the UK to France. This move is part of their broader strategy to expand their operations within the EU.

While Newcleo shifts its focus to France, it still has big plans for the UK. The company intends to invest in and develop next-generation Small Modular Reactors (SMRs) to contribute to the UK’s electricity grid. However, their UK ambitions faced a setback when the government denied private companies access to the Sellafield site, leading Newcleo to shelve a planned project there. Despite this, Newcleo’s collaboration with France’s CEA to develop a lead-cooled fast reactor marks a significant step in their European expansion.

Here’s the complete list:

From this trend and analysis, it’s clear that 2024 has showcased substantial investment potential for renewable energy leaders. The significant funding, particularly in Asia and the U.S. highlights the demand and opportunity in the renewables. Media reports say, solar remains at the top while nuclear gaining a high momentum in the future.

Disclaimer: Data source CBInsights report

MUST READ: Climate-Tech Startups Amass $7.6B in Q3, Setting New Record for VC Funding

The post Top 3 US Renewable Energy Deals Q2-2024: Trends and Analysis appeared first on Carbon Credits.

The U.S. military is ramping up its investment in Canadian mining with a significant new grant. On Tuesday, the Pentagon announced a $20 million U.S. grant to Electra Battery Materials Corporation to set up the cobalt refinery in Temiskaming Shores, Ontario.

Unlocking Pentagon’s Funding Push for Electra Battery Materials

Electra Battery Materials has secured the investment from the U.S. Department of Defense (DoD) under Title III of the Defense Production Act, notes the press release. 

The award uses funds from the Ukraine Supplemental Appropriations Act of 2022. It supports the 2024 National Defense Industrial Strategy goal to boost domestic production of key minerals. Over the top, in June, the Canadian government also gave Electra USD 3.6M to advance a battery materials recycling project at the same refinery.

However, this grant is part of a broader initiative launched during President Joe Biden’s 2022 visit to Ottawa. Notably, the current one is the largest of several U.S. grants for securing critical mineral supplies in Canada. The DoD further added that the Ontario Cobalt Refinery’s construction will help Electra launch North America’s first cobalt sulfate hydrometallurgical plant.

Subsequently, this plant will produce cobalt sulfate which is a crucial component for lithium-ion batteries. These large batteries will consequently, support both defense projects and the growing EV supply chain in the U.S. and Canada.

Electra’s Groundbreaking Cobalt Facility

The project features a hydrometallurgical facility with a proven track record. Notably, it is the only one in North America providing cobalt sulfate for EVs. Its modular design allows it to expand as the EV market grows. Additionally, the site is fully permitted and ready for future expansion. It also boasts 51% lesser greenhouse gas emissions compared to Chinese facilities, thanks to its hydroelectric power source. Ultimately, at full capacity, it could produce enough cobalt sulfate for over 1 million EVs annually.

The company also manages its emissions effectively, we can estimate this in the table acquired from its sustainability report.

source: Electra Battery Metals

SEE MORE: Cobalt Crunch: Prices Plummet, Supply Challenges Loom in the Race to Net Zero

What’s Driving this Cobalt Investment?

Media pundits have analyzed the investment from a different angle. They have explained that these investments reflect the growing concerns about reliance on China for essential minerals needed for EVs, electronics, and most importantly weapons systems.

Furthermore, with tensions over Taiwan, the U.S. seeks to diversify its supply chain and enhance its national security.

The first two grants earlier this year targeted copper, gold, graphite, and cobalt projects in Quebec and the Northwest Territories, totaling under $15 million. These earlier grants had no repayment obligations or commitments to sell minerals exclusively to the U.S. military. However, in times of crisis, Canadian law allows Ottawa to prioritize raw material sales to NATO allies.

Dr. Laura Taylor-Kale, Assistant Secretary of Defense for Industrial Base Policy, said,

“This award will develop North American production of a key precursor material for large capacity batteries, helping to create a more robust industrial base capable of meeting growing demand across both the defense and commercial sectors.”

Canada’s Critical-Mineral Wealth

Global demand for critical minerals is set to rise sharply. IEA predicts a 6X increase in the energy sector’s needs by 2040. Notably, the North American zero-emission vehicle market alone has the potential to hit $174 billion by 2030, as reported by Cananda’s Critical Mineral Strategy. Moreover, Canada is a key player in cobalt, graphite, lithium, and nickel—essential for future batteries and electric vehicles.

Therefore, investing in these minerals is crucial for a green energy transition in Canada and worldwide. This investment builds a sustainable industrial base, supporting emission-reducing supply chains and climate change solutions for future generations.

A Clean Energy Canada report suggests that a Canadian battery supply chain could contribute $5.7 billion to $24 billion to GDP by 2030.

Jonathan Wilkinson, Minister of Energy and Natural Resources Canada has given a long statement in the press release. He remarked,

“From mining responsibly sourced critical minerals, to processing them here in North America, to building batteries for electric vehicles and other key technologies, and eventually to recycling them, there is enormous opportunity for both Canada and the United States from both an economic and a security perspective. Through our continued work with the United States, driven by the Energy Transformation Task Force and the Joint Action Plan on Critical Minerals Collaboration, and other allies, we are developing secure critical minerals value chains that will create good jobs in places like Temiskaming, Ontario and beyond, and will power prosperous economies and a future that works for everyone.”

Overall, the US DoD’s investment would give a significant boost to cobalt production in Canada. With Electra Battery Materials as partner, we expect impressive results in the coming years.

FURTHER READING: Global Lithium and Battery Trends: Top Stories You Need to Know!

The post Canada’s Cobalt Cache: Pentagon Invests US$20 Million on Electra Battery Materials appeared first on Carbon Credits.

Notably, Q2 2024 marked the second consecutive quarter without any new unicorns (private companies reaching valuations of $1 billion or more) in the climate tech space. This absence of new unicorns coincides with the decline in late-stage deal sizes, further emphasizing the current caution among investors. 

The overall decline in climate tech funding and the shift towards smaller deals reflect broader trends in the market, where investors are becoming more selective and cautious in their approach. Venture capital (VC) remains the largest group (25%) investing in the industry quarterly since 2020. 

Here are the top four venture capital climate companies according to the CB Insights Report, which are worth noting in boosting green technologies that help in the fight against climate change.

SOSV: The Accelerator Driving Deep Tech and Planetary Health

Location: United States

SOSV is a global venture capital firm known for investing in early-stage deep tech startups with a focus on human and planetary health. Founded in 1995 by Sean O’Sullivan, SOSV has grown its assets under management to over $1.5 billion, supporting more than 500 startups worldwide. The firm operates several accelerator programs, including IndieBio and HAX, which provide startups with access to laboratories, office spaces, and mentorship.

Through these programs, SOSV has backed over 1,000 startups across various sectors, including health, food, and sustainability.

SOSV is deeply committed to environmental sustainability. The firm has made significant strides in supporting companies that are working to reduce carbon emissions and address climate change. For instance, it has invested in companies developing alternative proteins, carbon capture technologies, and other solutions aimed at reducing the carbon footprint of industries. SOSV’s portfolio companies have collectively raised billions in follow-on funding, and several have achieved unicorn status.

Image from Medium.com

The VC firm created the “Climate Tech 100”, which highlights top climate-focused startups from SOSV’s portfolio. The 2024 edition features 30 new companies, with an aggregate valuation of $11.1 billion and $3.68 billion raised in total, including $151 million from SOSV itself.

SOSV 2024 Climate Tech 100 Portfolio

SOSV’s commitment and leadership in climate tech investment have been recognized by PitchBook, which ranks SOSV as the most active investor in climate tech, agtech, and carbon emissions technology since 2018.

Sean O’Sullivan, the Managing General Partner of SOSV, emphasizes that despite the recent downturn in climate tech funding, the sector is poised for a resurgence driven by critical global needs and favorable trends in industrial sustainability and reshoring U.S. production capabilities.

The investor is also increasingly focusing on critical minerals, recognizing their essential role in the renewable energy transition. The firm invests across the entire critical minerals value chain, from exploration to extraction and processing. These minerals are vital for the production of batteries, electric vehicles, and other clean energy technologies, making their sustainable sourcing a key priority for SOSV.

Global Brain: Fostering Global Innovation for a Greener Tomorrow

Location: Japan

Global Brain is a leading venture capital firm with a mission to foster innovation by investing in startups worldwide since 1998. With over $1.9 billion in assets under management, Global Brain has backed more than 1,000 startups, covering industries such as technology, sustainability, and critical minerals. 

The firm is particularly focused on supporting the transition to renewable energy, investing in companies that work on eco-friendly technologies and the sustainable sourcing of critical minerals essential for the clean energy sector.

Global Brain Climate Tech Portfolio Companies

Global Brain operates globally, with a presence in key innovation hubs like Tokyo, Silicon Valley, and London. The firm collaborates closely with large corporations through its corporate partnership programs, facilitating open innovation and helping startups scale more effectively. This collaboration has enabled Global Brain to drive advancements in critical industries, including the sourcing and processing of critical minerals crucial for renewable energy technologies such as batteries and electric vehicles.

The firm’s notable investments include companies Orbital Marine Power, known for its pioneering tidal energy technology that promises to generate clean, renewable energy from ocean currents.

Global Brain has also played a significant role in expanding its portfolio internationally. The firm’s global reach includes investments in high-growth markets such as the U.S., Europe, and Southeast Asia, contributing to its robust track record of successful exits and partnerships.

Global Brain investment by region

Global Brain is actively involved in supporting technologies that contribute to sustainability and carbon footprint reduction. The firm invests in startups that focus on renewable energy, energy efficiency, and environmental conservation. For example, their investment in TerraCycle, a company dedicated to recycling hard-to-recycle waste, reflects their commitment to tackling environmental challenges and promoting a circular economy.

Lowercarbon Capital: Fast-Tracking the Low-Carbon Revolution

Location: United States

Lowercarbon Capital is a prominent venture capital firm dedicated to accelerating the transition to a low-carbon economy. Founded by Chris Sacca and his team, the firm focuses on investing in innovative technologies and business models that address the climate crisis and reduce global carbon emissions.

Their portfolio includes startups pioneering innovations like zero-carbon cement, methane reduction in computing, fully electric planes, and advanced carbon removal technologies. Lowercarbon Capital is committed to supporting scalable solutions that can significantly reverse climate change while also delivering strong financial returns. This top VC company focuses on these three main areas:

Since its inception, Lowercarbon Capital has raised over $1 billion to invest in breakthrough climate technologies. The firm’s portfolio includes pioneering companies in sectors such as carbon capture, renewable energy, and sustainable agriculture. Notable investments include companies like Charm Industrial, which is developing direct air capture and bioenergy with carbon capture and storage (BECCS) technologies with the potential to sequester millions of tons of CO2 annually.

Another key investment is in Nori, a platform focused on carbon removal through regenerative agriculture, aiming to sequester 10 million tons of CO2 per year.

Lowercarbon Capital’s strategic approach includes both early-stage and growth-stage investments. The firm’s support has been instrumental in scaling technologies that have the potential to achieve significant emissions reductions. For instance, Lowercarbon Capital has helped fund innovations that could potentially reduce global carbon emissions by up to 5% over the next decade.

The firm’s investment strategy is centered on high-impact climate solutions with a focus on scalability and effectiveness. Lowercarbon Capital targets technologies with the potential to cut carbon emissions across various industries, including energy, transportation, and agriculture. Their portfolio features technologies that aim to reduce carbon footprints by capturing and storing CO2, enhancing renewable energy integration, and promoting sustainable practices, which are crucial for achieving net-zero goals.

Breakthrough Energy Ventures: Billion-Dollar Bets on Net-Zero Technologies

Location: United States

Breakthrough Energy, founded by Bill Gates and a coalition of influential investors, is at the forefront of advancing technologies aimed at reducing global carbon emissions. The firm is dedicated to funding and scaling innovations that drive sustainable development and address climate change.

Breakthrough Energy Ventures (BEV), the firm’s investment arm, has invested over $2 billion in more than 60 high-impact startups. BEV has committed over $3.5 billion in capital to support more than 110 innovative companies, spanning from seed to growth stages.

Key investments include QuantumScape, which has developed a solid-state battery with the potential to increase energy density by 50% compared to conventional lithium-ion batteries, and Twelve, a company turning CO2 into valuable chemicals with a goal to reduce emissions by up to 50 million tons annually.

BEV’s investment strategy is guided by its focus on the Grand Challenges, which aim to:

Develop Scalable Climate Solutions,
Attract Additional Investment, and
Address Critical Gaps in Climate Technology.

Breakthrough Energy Catalyst, another arm of the organization, supports large-scale projects with an investment goal of $15 billion to accelerate the commercialization of clean technologies. Catalyst projects include direct air capture systems and advanced hydrogen electrolyzers, with the potential to remove up to 1 billion tons of CO2 from the atmosphere annually by 2030.

Breakthrough Energy’s portfolio emphasizes substantial carbon footprint reduction. Investments target areas with significant impact potential, such as energy storage and low-carbon fuels. Through strategic partnerships and collaborative efforts, Breakthrough Energy is driving systemic change and working towards a net-zero future.

Climate tech funding experienced a downturn in Q2 2024, with investor caution leading to fewer large deals and no new unicorns. Despite the decline, early-stage opportunities remain promising.

Top venture capital climate companies like SOSV, Global Brain, Lowercarbon Capital, and Breakthrough Energy Ventures continue to invest in innovative technologies that could shape the future of climate solutions. These firms are pivotal in driving progress towards a low-carbon economy through strategic investments and global partnerships.

The post The Top 4 Venture Capital Climate Companies: How Are They Shaping the Green Future? appeared first on Carbon Credits.