The European Union’s (EU) upcoming carbon border tax is causing waves of anxiety among British green energy producers. As per the new directive, “British wind and solar farms exporting power to continental Europe from 2026 could face CO2 fees, despite producing no emissions, unless the UK and EU agree to amend the carbon border tax.”

Thus, industry leaders fear that this new policy could penalize the UK’s green energy sector. They are apprehensive that their efforts to combat climate change could be undermined, potentially disrupting trade relationships.

What is the Carbon Border Tax?

The EU’s carbon border tax, officially known as the Carbon Border Adjustment Mechanism (CBAM), is designed to prevent “carbon leakage”. This happens when companies shift production to countries with weaker climate regulations, thereby undermining global efforts to reduce emissions. The tax aims to level the playing field by imposing fees on imported goods from countries with less stringent climate policies.

Will the EU CBAM Impact British Renewable Exports?

A few days ago, Reuters reported that industry experts revealed how charges outlined in a little-known clause of the CO2 levy law could impact the revenues of renewable energy projects in the UK. This could further add to already-high EU power prices and even lead to higher emissions.

Andy Berman, deputy director of the industry group Energy UK pointed out that it’s a two-way problem. She added,

“(It) disincentivizes clean power in the UK at the moment in which we’re trying to ramp up the provision of clean power, and it’s going to increase (power) prices in northern Europe.”

Catherine Stewart, the UK Treasury’s deputy director for trade policy also expressed her views on EU’s tax policy by stating,

“It is an issue that we are conscious of and one that we have raised, that the UK has raised, with the EU.”

Despite the UK’s commitment to reducing emissions and its robust green energy sector, industry leaders fear that the carbon border tax might negatively impact British companies. The concern is that the tax will be applied to all imports, regardless of the exporting country’s green credentials and carbon footprint.

source: Carbon Border Adjustment Mechanism – European Commission (Europa.eu)

Let’s elaborate on the potential impact on the renewable industry and trade relations at large.

Economic Feasibility at Risk

Analysts warn that the additional costs could render it “uneconomic” to export surplus clean power from Britain to Europe, especially during periods of low demand, high renewable generation, and low power prices.

Aurora Energy Research’s analysis, shared with Reuters, indicates:  

Up to 3 GWh of renewable power could be curtailed by 2030 if the fee discourages exports. This capacity is enough to supply 2,000 homes annually.
Adding a tax on exports essentially reduces the profit margin every time exports occur. By 2030, the carbon border fee could reduce the revenue British renewable projects earn for their power by 5%.

The research firm highlighted key facts about the renewable capacity buildout based on government policy and market forces.

1. Increasing power demand

Europe aims to decarbonize and achieve Net Zero emissions by 2050, primarily by electrifying its economy and expanding renewable energy to cut emissions. Growing demand for Power Purchase Agreements (PPAs) boosts investment in renewables. Enhanced energy efficiency lowers power demand.

2. Strong policy support and Government ambition

Government ambition pushes deploying renewables and robust policy support fosters investor confidence. Sudden policy changes or lack of support can harm investor confidence in renewables within a country.

3. Rising fuel and carbon prices

High gas prices have led to a switch back to coal generation. New market players have increased speculation and volatility, a trend expected to continue. Independent Commodity Intelligence Services (ICIS) estimates carbon prices will reach €90 per tonne by 2030.

4. Phase-out of thermal capacity

As Europe phases out coal and older, unabated gas assets to meet decarbonization goals, it creates opportunities for low-carbon alternatives to meet rising power demand. The retirement of thermal capacity strains system requirements like frequency and voltage control, which cannot be fully met by renewables alone.

Impact on Wholesale Prices and Emissions

Market Screener has reported two interesting analyses:

Aurora Research: The company analyzed the consequence of the reduction in cheap British electricity exports. It can potentially spike wholesale power prices by up to 4% in markets like Ireland and Northern Ireland which rely heavily on UK imports.

AFRY Services: The research firm indicated that if European countries increase coal and gas power generation to cover the shortfall, CO2 emissions could rise by 13 million tonnes annually. This increase is equivalent to the emissions of 8 million cars.

The figure shows that: Failure to remove renewables barriers leads to 80% higher CO2 price in 2030 significantly raising wholesale electricity prices for European industry & consumers.

sources: Aurora Energy Research, EIKON, S&P

MUST READ: UEFA’s Green Goals: $7.6M Climate Fund for EURO 2024 Carbon Footprint (carboncredits.com)

Can Renewable Exports Avoid CO2 Fees?

A European Commission spokesperson stated that renewable power exports could avoid CO2 fees if they meet specific criteria and prove their origin. However, industry experts argue this is challenging. They assume that most electricity traded across interconnectors is anonymous, making it difficult to calculate the carbon content.

They have also voiced concerns, stating the tax penalizes sectors leading the fight against climate change. RenewableUK stressed the need for a system that rewards green energy credentials without unnecessary barriers. They called for policies that consider the actual carbon footprint of imports rather than applying a blanket approach.

Linking Carbon Markets: A Viable Solution

One potential solution is linking the EU and UK carbon markets, which would exempt UK power producers from the tax. 

RELATED: UK Reveals Move for a Carbon Border Tax in 2027 (carboncredits.com)

Alistair McGirr, SSE’s Group Head of Policy and Advocacy noted,  

“Linking the carbon markets could prevent UK exporters from paying a tax to the EU that could otherwise benefit the UK budget.”

Despite this suggestion, neither Brussels nor London has shown enthusiasm for the idea.

Former UK climate change minister Graham Stuart also spoke in favor of linking carbon markets that could be explored under the post-Brexit Trade and Cooperation Agreement. The European Commission spokesperson added that the EU is open to linking its carbon market with others, but it “must stem from a mutual wish from both parties.”

Green Enhancing, Not Green Washing: Bolstering EU’s Carbon Markets

We discovered a significant aspect of tax implication on industry and consumers from the latest press release of the Council of EU.

Notably, the Council adopted its position on the Green Claims Directive to tackle greenwashing and help consumers make informed greener choices. The directive sets minimum requirements for substantiating, communicating, and verifying environmental claims. This move follows a 2020 study revealing that over half of environmental claims are vague, misleading, or unfounded. Thus, reliable, comparable, and verifiable claims are essential for informed consumer decisions.

Alain Maron, Minister of the Government of the Brussels-Capital Region, responsible for climate change, environment, energy, and participatory democracy has commented on this move, 

“Today, we reached an important agreement to fight greenwashing by setting rules on clear, sufficient and evidence-based information on the environmental characteristics of products and services. Our aim is to help European citizens to make well-founded green choices.”

Organizations like Anew Climate, Rubicon Carbon, and others, hailed the EU’s progress on the Green Claims Directive (GCD) but called for further action to ensure it supports transparent and credible green claims, vital for achieving net zero. Key recommendations include:

Reliable Green Claims: Ensure claims are reliable, comparable, and verifiable across the EU to prevent greenwashing.
Simplified Framework: Avoid unnecessary administrative burdens and support the use of all types of carbon credits, not just EU-originated removal credits.
Uniformity in Standards: Align with existing frameworks like the CRCF and ICVCM to avoid overlap and enhance international consistency.

They collectively believe adopting these measures will boost voluntary private-sector investment in climate mitigation. It would also advance the Green Deal and strengthen Europe’s competitive market.

source: EU-CBAM

This analysis emphasizes the need for dialogue between UK and EU policymakers to ensure the tax does not sabotage the global fight against climate change. Furthermore, a balanced approach is crucial for British Green Energy to recognize its efforts while minimizing trade disruption. Overall, the future of UK-EU trade and the global climate agenda hinges on achieving this equilibrium.

FURTHER READING: EU Commission Backs Germany’s Renewable Hydrogen Plan with $380M Funding  • Carbon Credits

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As Canada strides towards its net zero pledge, the University of British Columbia has unveiled the Smart Hydrogen Energy District (SHED), a $23 million facility dedicated to advancing hydrogen infrastructure and renewable energy research. This innovative project, powered by solar and hydropower, showcases hydrogen’s pivotal role in achieving a sustainable, low-carbon future for Canada.

Advancing Hydrogen Innovation at BC

The Smart Hydrogen Energy District (SHED) at the University of British Columbia (UBC) has been officially launched, marking a significant advancement in British Columbia’s hydrogen infrastructure. This $23 million facility, equipped with a hydrogen fueling station, aims to revolutionize critical energy research.

SHED will produce hydrogen using solar and hydropower to operate a water electrolyzer, ensuring a completely green and renewable process. It is one of the pioneering initiatives to combine hydro, solar, and hydrogen energy at a single site, connecting these renewable sources to a unified micro-grid. 

Notably, SHED will be the province’s first hydrogen station to serve both light- and heavy-duty vehicles.

Honourable Josie Osborne, Minister of Energy, Mines and Low Carbon Innovation, said that UBC SHED is a significant leap toward building a clean economy. Osborne further noted that by integrating energy, transportation, and design, SHED supports CleanBC goals and positions British Columbia as a global leader in the hydrogen economy.

Bridging Renewable and Sustainable Energy 

Dr. Walter Mérida, SHED research lead, highlighted the importance of hydrogen in Canada’s transition to a low-carbon economy. He remarked that SHED demonstrates hydrogen as a bridge between renewable electricity and sustainable energy services. 

SHED combines various technologies within a city block, serving as a model for compact urban planning. A rooftop solar array powers both the hydrogen fueling station and nearby electric vehicle (EV) charging stations. Two-way charging enables parked EVs to draw power from the grid and return excess stored electricity during peak demand hours. 

With this kind of infrastructure, cars can also serve as mass power banks, stabilizing the electric grids of the future.

A secure 5G network connects SHED’s systems, enabling researchers to create digital simulations for energy, transportation, and urban planning research.

UBC Smart Hydrogen Energy District

Leading the Charge in Hydrogen Infrastructure

Jovan Ceklic, Director of Hydrogen Infrastructure at Powertech Labs, highlighted the importance of this UBC hydrogen development, saying:

“Powertech Labs is excited to have partnered with the University of British Columbia to bring one of the first-of-its-kind truly green hydrogen stations. With an on-site electrolyzer powered by solar power and support from BC Hydro’s green energy grid, the UBC station produces some of the cleanest hydrogen on the market.”

Ceklic also noted that it’s a significant milestone being one of the “first mixed-use stations able to dispense 350 bar and 700 bar fuels for light and heavy-duty applications in Canada”. Moreover, it can potentially offset the tailpipe emissions from more than 4,300 cars. And with the transportation sector responsible for releasing almost 21% of all greenhouse gases in the country, every hydrogen station counts, he added. 

Powertech Labs is proud to be part of this transition. 

The company has over 20 years of experience in the hydrogen industry, providing various hydrogen transport products and refueling services. These include hydrogen station testing, hydrogen fueling services, hydrogen station capabilities and services, and more. 

Powertech Labs has deployed over 90% of the installed hydrogen fueling stations in Canada, according to Ceklic. The country has been investing in the hydrogen sector as outlined in its Hydrogen Strategy. 

Source: Canada Hydrogen Strategy

Clean hydrogen can deliver up to 30% of Canada’s end-use energy by 2050. This means abating up to 190 Mt of CO2e of GHG emissions through deployment in transportation, heating, and industrial applications. 

Mapping the country’s hydrogen production and end-use, this is how it looks, according to Canada’s Hydrogen Strategy.

Catalyzing the Hydrogen Economy

The global hydrogen market is expected to grow significantly in the coming decades. Announced hydrogen production could cover 50% of the volume needed to meet global net zero emissions goal. 

With interest in hydrogen booming across Canada, UBC’s SHED is hoped to attract other clean energy innovators. The goal of the project is to accelerate climate solutions and seek industry and private sector partners for collaboration. 

SHED’s launch represents a pivotal step in the evolution of hydrogen infrastructure and renewable energy research, positioning British Columbia at the forefront of the global energy transition.

Over in Alberta, the province also launched its inaugural commercial hydrogen fueling station with Nikola Corporation’s HYLA brand in April. This major hydrogen initiative is also a product of collaboration among key stakeholders. 

READ MORE: Nikola’s HYLA Stations Are Supercharging the Hydrogen Revolution

In Canada’s 2024 budget, there was a plan to introduce clean hydrogen investment tax credits soon. This could further fuel support and investment in building more hydrogen infrastructure in the country.

The UBC Engineering project marks a major milestone in British Columbia’s push towards a sustainable hydrogen economy. By combining solar, hydro, and hydrogen energy, SHED is poised to drive significant advancements in clean energy research and infrastructure, solidifying the region’s position as a leader in the global energy transition.

The post University of British Columbia and Powertech Pioneer $23M Hydrogen Fueling Station appeared first on Carbon Credits.

Google’s Alphabet is advancing towards its zero-carbon goals by partnering with NV Energy, to supply its Nevada data centers with geothermal electricity. With this move, Google plans to inject 115 megawatts of carbon-free geothermal power over the next six years. However, the deal is pending approval from state utility regulators.

Let’s zoom in on the details here:

Google and NV Energy Amplify Clean Power 25x with CTT

From a regulatory perspective, Google’s partnership with Berkshire Hathaway’s electric utility, NV Energy is based on a “Clean Transition Tariff” (CTT) to procure 115MW of RE from a geothermal power plant operated by Fervo Energy.

Notably, Fervo Energy began a pilot program with Google in 2021 and is now set to significantly scale up its supply to meet Google’s growing demand for renewable power.

MUST READ: Fervo Energy’s Breakthrough in Enhanced Geothermal Systems: A Game-Changer for Renewable Energy (carboncredits.com)

The company has been working with partners across the U.S. to create a scalable approach for utilities and large energy users to invest in clean firm capacity. They aim to speed up the commercial deployment of advanced clean technologies.

Most significantly, Google-NV energy deal will further enhance geothermal capacity by ~ 25 x.

This expansion brings more round-the-clock carbon-free energy to the local grid, supporting Google’s data center operations like AI and cloud computing in Nevada.

CCT Bolsters the Grid and Customers’ Confidence for a Sustainable Future

The Clean Transition Tariff (CTT) brings together utilities and customers in long-term energy agreements. Here’s how it can transition U.S. holistically to a sustainable future:

 Fosters investments in new projects that supply clean power to the grid. This, in turn, would amplify clean energy capacity and boost grid reliability.
Allows customers to meet their rising power demands with 24/7 carbon-free energy.
Customers gain long-term benefits of enhanced clean and reliable power through their existing utility connections.

Amanda Peterson Corio, Global Head of Data Center Energy, and Briana Kobor, Head of Energy Market Innovation at Google have expressed themselves in Google blog by noting,

“It’s not just Google that stands to benefit from this new model. If widely adopted across U.S. markets, the CTT structure can expand clean energy capacity and improve grid reliability, accelerate the roll-out of new technologies needed to enable clean industrial growth, and bring the economic benefits of clean energy to communities everywhere.”

The Rise of Revamped Procurement Models to Drive Energy Transition

Amanda and Briana have further revealed in their article that many companies secure clean energy, mainly wind and solar, through power purchase agreements (PPAs) with project developers. Google has been a leader in this successful model. Since 2008, corporate clean energy buyers have contributed nearly 200 GW of new solar and wind capacity globally.

However, they have highlighted the drawbacks of this method, like

PPAs are often not integrated with broader grid planning and utility investment processes.
Weather variability can lead to inconsistent availability of solar and wind energy.

Therefore, achieving fully decarbonized electricity systems necessitates technologies capable of providing clean power at any time, known as “clean firm capacity.” However, technology is still in its infancy primarily due to improper regulatory framework and huge cost factors. Consequently, customers are forced to depend on fossil fuels for consistent power when renewables are insufficient.

Thus, Google believes in taking full advantage of 24/7 carbon-free energy technologies. It is addressing the increasing demands of local grids with a streamlined approach to investing in clean energy projects that provide firm capacity.

Is Google’s CTT a Game-Changer for Clean Energy Investment?

Based on the confirmative statements made by Google officials, we can confidently say YES to this question.

Furthermore, Google claims that the CTT will enhance the clean energy transition by enabling companies like NV Energy to receive funds downright to invest in new technologies. Certainly, this is a unique approach and significantly different from traditional power purchase agreements (PPAs). Subsequently, helping Google offset its emissions.

In 2022, Google signed contracts for approximately 2.8 GW of clean energy generation capacity, the highest ever.

Google’s latest environmental report shows that 64% of its global operations use carbon-free energy such as wind and solar.

Below is the image of Google’s carbon footprint for 2022. It aims to reduce 50% of our
combined Scope 1, 2 (market-based), and 3 absolute GHG emissions before 2030.

source: Google Environmental Report

The deal with NV Energy is a strategic move to increase this percentage, highlighting Google’s commitment to its clean energy goals. From media reports, we also discovered that Duke Energy has already partnered with Google and others to develop a similar CTT model in the Southeast United States.

Powering Nevada: NV Energy and Google Transform Clean Energy Access

In Nevada’s regulated power markets, companies struggle to source entirely clean energy directly from generators. This groundbreaking partnership tackles this challenge by integrating Google into NV Energy’s power generation with the help of CCT.

Doug Cannon, president and CEO of NV Energy has given a long statement on the prospects of this deal. He said,

“The partnership can develop new solutions to bring clean, firm energy technology — like enhanced geothermal — onto Nevada’s grid at this scale is remarkable. This innovative proposal will not be paid for by NV Energy’s other customers but will help ensure all our customers benefit from cleaner, greener energy resources. If approved, it provides a blueprint for other utilities and large customers in Nevada to accelerate clean energy goals.”

Nevada consumes 6X more energy than the state produces in part because Nevada produces only small amounts of natural gas and crude oil and does not mine any coal. Geothermal energy, which utilizes naturally occurring underground heat to generate electricity, holds considerable promise in Nevada.

According to US Energy Information and Administration (US EIA)

In 2023, Nevada accounted for 26% of the nation’s utility-scale electricity generation from geothermal energy. Only California generated more.
Geothermal resources contribute to about 10% of Nevada’s total electricity generation.

This pivotal agreement with NV Energy integrates advanced geothermal projects, delivering carbon-free electricity to power Google’s data centers. Google will keep partnering with utilities, regulators, and energy customers to drive clean energy investments, and advanced technologies, and build a robust, carbon-free grid.

FURTHER READING: US Data Center Power Use Will Double by 2030 Because of AI (carboncredits.com)

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According to a new analysis by Calyx Global, a carbon credit ratings platform, the quality in the voluntary carbon market (VCM) shows promising signs of improved integrity. The report combines market trend data with Calyx Global’s ratings of over 500 projects to offer insights into the ongoing efforts to enhance carbon market integrity.

Finding higher-rated carbon credits in the VCM remains challenging due to the dominance of mega-projects, such as REDD (Reducing Emissions from Deforestation and Forest Degradation) and large-scale grid-connected renewable energy projects, which typically do not achieve higher ratings (A and B). 

Calyx Global’s co-founder, Donna Lee, emphasizes the need for higher-quality carbon credits to restore confidence in the market. 

“We wanted to start tracking quality, recognizing that the voluntary carbon market is starting to mature. The quicker we improve carbon credit quality and restore confidence, the more effective companies can be at addressing climate change.”

The report, “The State of Quality in the Voluntary Carbon Market”, identifies major trends and below are the key findings.

Decrease in Low-Quality Carbon Credits Issued

Since 2021, media scrutiny over the voluntary carbon market has intensified, coinciding with a rise in carbon credit issuances. Both market volume and media criticism peaked in 2023. However, there has been a notable shift in the quality of credit issuances, especially from the beginning of 2024.

Quality in the VCM highly varies, with both poor-quality and high-quality credits in every sector analyzed by Calyx Global. To date, projects in the Manufacturing and Industry sector has the highest GHG integrity.

According to the analysis, which has rated over half of all credits issued in the past 5 years, only about 20% of these credits fall into the top half of their rating scale (C+ and above).

Notably, less than 10% of the rated credits received a B rating or higher. This highlights the difficulty in sourcing high-integrity carbon credits in the current market landscape. 

The issuance of low-rated credits (E-rated) has significantly declined, dropping by nearly 50%. This decrease is primarily due to a reduction in credits issued from REDD+ projects. These credits have historically been skewed towards lower ratings.

RELATED: Rimba Raya REDD+ Project Revocation Rattles Carbon Market

The decline in REDD+ credits has been partially offset by an increase in issuances from household and community projects, such as cookstove credits. These projects tend to have more credits in the “C” rating range.

Despite the overall improvement in credit quality, high-rated credits (A and B ratings) remain rare. This rarity is due to the smaller number of such projects actively issuing credits in the market today. Additionally, these higher-rated projects tend to be smaller in scale compared to mega-projects like REDD and large-scale renewable energy projects.

Slow Adoption of Quality Updates 

Despite recent shifts towards higher quality in the VCM, a clear and consistent trend has yet to emerge.

Over 75% of new listings on major registries—American Carbon Registry (ACR), Climate Action Reserve (CAR), Gold Standard, and Verified Carbon Standard (VCS)—come from the Forest & Land and Household & Community sectors. These sectors show mixed results in Calyx Global’s rating system.

The Forest & Land sector is dominated by improved forest management (IFM) and afforestation/reforestation (AR) projects, which are undergoing methodological changes aimed at enhancing their effectiveness and integrity. 

In the Household & Community sector, cookstove projects make up the majority of new listings. And efforts are underway to refine cookstove methodologies to improve their quality and impact.

It may take time for low-quality credits to be completely phased out of the system. Some low-quality credits are still tied up in forward contracts, delaying the full impact of improved quality standards. Although there have been improvements in the rules and requirements for generating carbon credits, these updates still need to be fully integrated into the active market.

A Tradeoff: GHG Integrity vs. SDG Impact

While buyers are attracted to benefits “beyond carbon,” such as social and environmental co-benefits, the primary driver of market trends is the search for higher greenhouse gas (GHG) integrity.

Around 54% of rated projects for GHG integrity have Sustainable Development Goals (SDG) contributions verified by a third party. This trend is especially prevalent among nature-based projects, which often seek additional SDG certification through programs like Verra’s Climate, Community, and Biodiversity (CCB) Standards and the Sustainable Development Verified Impact Standard (SD VISta), resulting in verified SDG contributions. 

READ MORE: Carbon Credits and the Sustainable Development Goals: Aligning Climate Action with Global Priorities

In contrast, waste and renewable energy projects frequently don’t pursue extra SDG certification. Or they are registered under programs that don’t require SDG claims to be verified.

Some argue that the ideal carbon credit should possess both high GHG integrity and significant SDG impact. However, such credits are currently challenging to find, per Calyx Global findings. There appears to be a tradeoff between GHG integrity and SDG impact in the current market. 

This tradeoff is partly because many projects that deliver the highest SDG impacts, such as REDD+ and cookstove projects, have issues with over-crediting.

Household-based projects often have verified SDG contributions, largely because of the Gold Standard‘s requirement to report, monitor, and verify at least three SDGs per project. Verra has now introduced a similar requirement.  

Calyx Global concludes that the VCM continues to evolve and is moving towards version 2.0. This analysis is crucial for instilling trust in carbon credits and enable them to effectively contribute to climate change mitigation.

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