Canada Commits $9.7 Billion to Propel Volkswagen Battery Plant

In a bold and strategic move, Prime Minister Justin Trudeau’s government has approved a whopping C$13 billion ($9.7 billion) in subsidies over ten years, securing a monumental Volkswagen AG electric-vehicle battery plant in Canada. It’s Volkswagen’s first outside Europe. 

This decisive action demonstrates Canada’s dedication to staying competitive in the global shift towards clean energy and technology.

As the world races towards achieving net-zero emissions, the demand for battery metals has skyrocketed. North America must urgently scale up the production and recycling of these metals to create a sustainable, secure supply chain. This is critical to support the exponential growth of electric vehicles and renewable energy infrastructure.

Canada’s Commitment to Clean Energy

By making a significant investment in the Volkswagen plant, Canada is staking its claim as not only a provider of critical minerals but a hub for advanced manufacturing and clean technology, too.

The Canadian government’s extraordinary subsidies are a direct response to the competitive financial incentives in President Joe Biden’s climate legislation. Trudeau’s administration recognizes that such investments are not only crucial to keeping pace with the US. They will also allow Canada to maintain a strong position in the North American auto sector as it transitions away from internal combustion engines.

Industry Minister François-Philippe Champagne asserts,

This is about us seizing generational opportunities. This is about raising our level of ambition.”

The Volkswagen plant has a massive footprint equal to 350 football fields. But on the positive side, it will create thousands of jobs in the region around St. Thomas, southern Ontario.

Furthermore, the economic value of this colossal project far outweighs the cost of the subsidies. Not to mention the supply chain spinoffs it will generate.

The staggering incentives package comprises annual production subsidies and a grant towards the factory’s capital cost. It effectively matches the benefits the German automaker would have received via the Inflation Reduction Act if it had chosen to build the plant in the US. 

The Canadian government is also in talks to provide financial assistance for an LG Energy Solution and Stellantis NV plant in Ontario.

It is worth noting that the Inflation Reduction Act offers generous, large-scale subsidies for low-carbon industries. This put pressure on Canada and other US trade partners to either provide similar support or risk losing out on lucrative new investments in the green economy.

Canada’s assertive move to land the Volkswagen electric-vehicle battery plant shows the country’s commitment to clean energy and technology. And by investing heavily in this sector, the country ensures that it remains competitive in the global race towards net zero emissions and a greener future.

As other nations vie for their share of the green economy, Canada has shown that it is ready and willing to go the distance in this critical mission.

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The Carbon Capture Abilities of Algae

Seed Health, a microbial science company, revealed its recent research showing that microorganisms, particularly blue-green algae, can unlock new carbon capture solutions. 

The research is a collaboration between SeedLabs, an environmental research division of Seed Health, and the team of the Two Frontiers Project (2FP) led by Dr. Braden Tierney. 

Remarking on the announcement, a co-founder of Seed Health stresses:

“…we founded SeedLabs to harness the power of microbes to enhance biodiversity and restore ecosystems impacted by human activity. With this collaboration, we have the potential to power the ‘bio-revolution’ in carbon technology and uncover novel solutions to address the climate crisis.”

The Need for Radical Carbon Capture 

The world is under extreme pressure to curb carbon emissions fueled by deforestation, increased use of fossil fuels, and industrial activities. All these make climate change worse, and the United Nations’ IPCC stressed the importance of carbon removal to mitigate it.

Scientists are making great strides towards scaling up the world’s capacity to remove and sequester carbon emissions in the atmosphere. And the research team from SeedLabs and 2FP. 

2FP’s innovative, data-driven approach to studying the planet’s carbon-rich environments is perfect for discovering microbes ideal for carbon capture. Their results can help drive the discovery and development of advanced CO2 sequestration technologies.

Dr. Tierney said that microbial dark matter has the great “potential for understanding and improving the health of our planet.” He added that their team at the 2FP is using microbial exploration and scaling it to provide next-gen sequencing technologies. 

Powering the Bio-Revolution to Seize Carbon

SeedLabs funded the research composed of two expeditions. These are CARBON1 in Vulcano, a small island off Sicily’s coast, and CARBON2 in the Rocky Mountains of Colorado. Research team members are from the University of Palermo, Harvard Medical School, Colorado State University, and the University of Wisconsin-Madison.

Using advanced scientific methods, they succeeded in discovering a never-before-seen volcanic green photosynthetic bacteria known as cyanobacteria that are so efficient at consuming CO2 and seem to outperform other microbes. 

Cyanobacteria, or blue-green algae, are microscopic organisms that naturally live in water and have a big appetite for carbon dioxide. They are also capable of converting the captured carbon into biodegradable bioplastic.

The team in the first expedition, CARBON1, sampled water, sediment, and other sources of microbial life present in Vulcano. The collected carbon-capturing microbes were cultured in a lab environment, from which a bigger team discovered a new cyanobacteria strain. 

According to a researcher from Harvard, the strain they isolated was more efficient at capturing carbon and seemed to adapt to the environment of the volcanic plumes by “becoming denser and sinking more readily”. This unique quality is ideal for carbon capture and deep ocean sequestration.  

The team of the second expedition, CARBON2, explored the carbonated springs in Colorado’s Rocky Mountains (captured below), which are known to contain a thousand times more CO2 levels than the volcanic seeps in Sicily’s Vulcano. 

A thermal pool in Colorado’s Rocky Mountains. Source: Seed Health

The scientists used the Oxford Nanopore’s MinION system in sequencing DNA in the field and designing media on-site to isolate microbes that capture carbon. The system shows the possibility of conducting remote science in extreme environments.

Creating a Unique, Open-Source ‘Living Database’ of Microbes

The group is creating a unique, open-source ‘living database’ of extreme microbiomes. It combines DNA sequencing data with a biobank of thousands of different environmental and biological samples. 

Their research approach is cutting-edge with the help of machine learning and microbial bioinformatics. This enables the team to continue their investigation from the field long after coming back to the lab. They can also go back to their stored samples and culture more microbes, depending on their scientific analysis.

Ultimately, the team can preserve and protect their metadata and biological material that future researchers can use. Their groundbreaking approach – DNA sequencing + cultivated biobank – is unmatched in extremophile (organism that thrives in extreme environments) microbiology.

This initiative expands SeedLabs’ environmental works beyond probiotic innovations in restoring ecosystems to include pioneering microbial technologies that can help address the most serious issues presented by climate change. 

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Former Tesla and Google X Executives Close $20M for CDR Tech

Ebb Carbon, an ocean-based carbon dioxide removal (CDR) company founded by former executives of Tesla and Google X, secured a $20 million funding for the development and deployment of its technology.  

The investment raised by Ebb Carbon in Series A round is the largest to date in an ocean-based CDR technology. It was raised in two closes, led by Prelude Ventures and Evok Innovations. 

The second close brought the total funds raised by the firm to $23 million, seed round is worth $3 million. Joining the recent investment round are investors from Incite, Congruent, and Grantham.

Remarking on Prelude Ventures’ investment, its Managing Director and Co-founder Gabriel Kra, said that:

“The team [Ebb] has previously demonstrated their abilities to build and scale industrial machinery, and has invented a technology that is a least-cost solution for ocean carbon dioxide removal.”

What is Ocean-based Carbon Removal? 

The goal of this type of CDR is to enhance and speed up the ocean’s natural ability to capture and store CO2 permanently. 

While reducing carbon emissions is a must, it’s not enough to meet the climate goal set during the Paris Agreement. The United Nations Intergovernmental Panel on Climate Change (IPCC) made it clear that removing CO2 already emitted is necessary to avoid the worst effects of climate change. 

Currently, there are various CDR technologies that are underway or being developed to do the job. One example is the Direct Air Capture (DAC) which directly draws in CO2 and extracts it for permanent storage underground. 

What makes ocean-based CDR different from those technologies is that it turns the 2-step process – capture and storage – into just one. Moreover, it reduces energy use requirements, streamlines the storage part, and offers one of the most cost-effective ways to remove CO2.

The oceans are constantly absorbing and storing CO2 from the atmosphere. But rising levels of this gas do not only change the climate, they also make the ocean more acidic. This, in effect, makes marine life at risk of extinction and coastal communities suffer from it. 

Meet Ebb Carbon, a California-based startup that pioneers a new method of carbon removal using electrochemistry. 

Ebb Carbon and Its CDR Solution 

Ebb Carbon is founded by scientists and climate tech veterans, with a team of chemists, engineers, physicists, oceanographers, and more. Collectively, they have more than 6 decades of experience in developing clean technologies at SolarCity, Tesla, and Google X. 

Ben Tarbell, CEO and Co-Founder of Ebb Carbon, commented on the fundraising:

“The ocean is a natural and vastly underutilized ally in this fight. Our approach combines capture and storage into one step, by accelerating naturally occurring processes that benefit from the immensity of the ocean’s surface area. This enables one of the lowest cost solutions for atmospheric CO2 removal at scale.”

The CDR company has developed a solution that’s one of the most promising to remove carbon at the gigaton scale. It’s using an electrochemical ocean alkalinity enhancement technology, which attracted commitments from Stripe for the purchase of carbon removal credits.

Ebb’s solution speeds up a natural process called ocean alkalization that restores ocean chemistry and safely absorbs CO2. It then converts the captured CO2 to bicarbonate, a safe and stable form of the gas.

Ocean alkalization occurs naturally over millions of years but Ebb’s electrochemical system enhances it, in a fraction of the time. The patented CDR tech rearranges the salt and water molecules and turns them into acid and slightly alkaline salt water solutions. 

After removing acidity from seawater, Ebb returns the alkaline seawater to the ocean where it mimics the natural alkalization process. This solution results in: 

Ocean deacidification: The alkalinity returned to the ocean acts like an antacid, lowering ocean acidity locally.
Permanent carbon storage: Bicarbonate naturally resides in the ocean and can store CO2 for 10,000+ years.
​Additional carbon removal: As CO2 in seawater converts to bicarbonate, the ocean pulls down more CO2 from the air.

How Ebb CDR System Works

Ebb’s ocean-based CDR system is modular, can process seawater directly from the ocean, and can be installed near any industrial source of salty water. These include desalination plants, aquaculture or energy production facilities that use ocean water for cooling.

Here’s how the proprietary Ebb Carbon ocean-based CDR system works.

Ebb’s Electrochemical Ocean Alkalinity Enhancement Process

As more CO2 locked away as bicarbonate, the ocean will naturally equilibrate and sequester more CO2 from the air. Ebb measures and monitors the pH level and alkalinity volume it creates using sensors and software. The data they generate is important for measuring and verifying the amount of CO2 that the system removes. 

Accurate and verified data is also crucial when the company claims the corresponding carbon credits. Every tonne of CO2 their system removes can earn them one carbon credit. 

With the recent $20 million investment, Ebb will start to deploy its first systems. One has the capacity to remove 100 tons of CO2 later this year, and the other system boosts a 1,000 tons removal capacity.

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Tesla Carbon Credits Revenue Up by 12%

Tesla, once again, is grabbing attention with its Q1 2023 revenue from the sales of carbon credits alone, not to mention income from selling electric vehicles (EVs).

The automaker recorded a 12% increase from the prior quarter’s sales, with $521 million in this first quarter compared to $467 million in Q4 2022.

Tesla has been earning revenues from the sales of its carbon credits for the previous years, reported a whopping $1.78 billion in 2022 alone.

Carbon credits, also known as carbon allowances or carbon offsets, are a way for companies to offset their footprint by investing in carbon reduction projects. These credits can be sold to other firms that struggle to meet emissions standards set by regulatory bodies like the California Air Resources Board or CARB.

Towering Up: Tesla Carbon Credits Revenue

Though Tesla has managed to improve its bottom line in previous quarters, carbon credit revenue continues to be a significant factor in Tesla’s earnings. In the current tough macro environment, Tesla would be in the red were it not for carbon credits – something that hasn’t happened in the last two years.

Tesla has been selling carbon credits to its peers such as Chrysler. It reportedly bought US$2.4 billion worth of Tesla’s carbon credits, accounting for most of the company’s sales in past years.

In 2019, the company made headlines when it earned a total of $600 million from selling carbon credits to fellow automakers that didn’t meet emissions standards set by CARB. 

Buying credits from Tesla allowed those companies to comply with regulations without making big changes in their own operations.

Reducing GHG emissions requires addressing both energy generation and use. This is what the transportation and energy sectors have been focusing on to slash their emissions.

Same as Tesla, other carmakers such as Audi, Porsche and Chrysler are also ramping up their electrification plans. Audi, for instance, aims to have 30 EV models by 2025 and have a 40% volume share of the EV market by that year.

Tesla has seized the net zero market through various revenue streams including EVs, solar installations, and carbon credits. But the rise of Tesla’s carbon credits sales over the years has significantly contributed to its revenues and profits.

Where Do All Tesla Carbon Credits Come From?

Tesla’s carbon credit income is all thanks to its EV production, which the company has also been the industry leader. The carmaker has been the top producer of innovative and eye-catching EV models since it started operating 20 years ago. 

In the first 3 months of the year, Tesla produced about 441,000 vehicles at four factories. Deliveries came in at about 423,000, representing a 36% increase year-over-year.

Tesla’s mission is to speed up the world’s transition to sustainable energy by electrifying transportation and the global economy.

Last month, Tesla proposed a path to reach a sustainable global energy economy through end-use electrification and sustainable electricity generation and storage. It’s outlined in the company’s paper “Master Plan Part 3 – Sustainable Energy for All of Earth”, with assumptions and calculations behind the proposal.

According to its analysis, the electricity sector gets 65 PWh per year of primary energy, including 46 PWh/year of fossil fuels. If the grid sources its power from renewable energy, the sector would need only 26 PWh/year of sustainable electricity generation.

In addition to producing EVs, Tesla also runs a solar panel installation business and sells energy storage systems. These operations are part of its quest for sustainability, which all generate carbon credits by avoiding carbon emissions.

Turning on the Switch of EVs

Electric vehicles are about 4x more efficient than internal combustion engine (ICE) vehicles, as per Tesla calculation. That’s mainly due to EVs’ higher powertrain efficiency, regenerative braking capability, and optimized platform design. 

The figure holds true across vehicle types – passenger vehicles, light-duty trucks, and Class 8 semis as shown in the table. 

For example, Tesla’s Model 3 energy consumption is 131MPGe compared with a Toyota Corolla with 34MPG, or 3.9x lower. The ratio is even more when factoring in upstream losses such as those from extracting refining fuel energy use. 

TESLA MODEL 3 vs. TOYOTA COROLLA ENERGY USE

Electrifying the transportation sector globally will reduce use of fossil fuels by 28 PWh each year. Applying the 4x efficiency factor for EVs, there will be an additional demand of ~7 PWh a year for electricity. 

According to a research body, the global EV market size accounted for US$205 billion in 2022 and will grow to around US$1.7 trillion by 2032.

Source: Precedence Research

In 2021, global EV purchases grew to 6.6 million, up from 3 million a year earlier, according to the International Energy Agency (IEA). EVs got a 9% share of the entire market and represented the total growth in global car sales. 

Tesla still took the lead in the U.S. EV market last year. Its cars are powered solely by the electrical charge stored in batteries. Technically, they’re called Battery Electric Vehicles or BEVs. 

One of the major reasons for Tesla’s dominance in the sector is this: Lithium ion batteries have the highest charge capacity among existing battery formulations. Thus, it makes Tesla EVs practical to have and to drive. 

As the world races to net zero emissions by 2050, electrification not just in transportation but across sectors is critical. Does this mean that demand for lithium will also increase?

The Rise of the “White Gold” 

Lithium is a non-ferrous metal known as “white gold”. It is one of the key components in EV batteries, alongside nickel and cobalt. 

A lithium-ion battery pack for a single EV contains about 8 kg of lithium, according to the US Department of Energy. But it can also depend on the battery size. A Tesla Model S’ battery, for instance, has over 62 kg of lithium.

The leading carmaker used around 42,000 tons of lithium carbonate equivalent in 2021. That’s more than 5x the combined lithium used by Ford and GM, according to BNEF data calculations

Global lithium production reached 100,000 tons or over 90 million kg last year. Meanwhile, the worldwide lithium reserves are about 22 million tons – or 20 billion kg, as per the US Geological Survey (USGS).

While China owns 70% to 80% of the entire supply chain for EVs and lithium-ion batteries, Chile has the world’s biggest lithium reserves. The South American nation is one of the so-called “Lithium Triangle” countries, along with Argentina and Bolivia. A little below 60% of Earth’s lithium resources are found in those three American countries.

The IEA’s 2050 Net Zero scenario says the world has to have 2 billion battery electric, plug‐in hybrid and fuel-cell electric light‐duty vehicles on the road by that date.

In Tesla analysis, lithium comprises 20% of the materials needed to deliver the energy storage in batteries for EVs relative to 2023 USGS data.

Statista projected the rising global demand for the white gold until 2030, increasing by over 700% from 2019.

Batteries will account for the bulk of lithium demand by the end of this decade, fueling the EV revolution.

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Ending Deforestation Will Cost $130B a Year by 2030, ETC Says

The Energy Transitions Commission (ETC) has published a new report, presenting a new analysis of how much it would cost to end deforestation, which it says would be at least $130 billion a year by 2030. 

The ETC is a global coalition of leaders from across the energy landscape committed to achieving net zero emissions by 2050, in line with the Paris climate goal of limiting global warming ideally to 1.5°C.

Its report “Financing the Transition: the costs of avoiding deforestation” highlighted the financial challenges of preventing people from cutting trees. It is a supplementary report to “Financing the Transition: How to make the money flow for a net zero economy”. 

The new report explores how concessional or grant payments, e.g. carbon credits, can reduce emissions and stop deforestation. It analyzes various estimates on how much of these payments is necessary to incentivize landowners not to cut down trees.

The report also emphasizes why it’s crucial to address the major drivers of deforestation. 

Why Put an End to Deforestation by 2030?

Forest loss due to human activities accounts for about 15% of total carbon emissions. The key driver of tree loss in tropical forests is agriculture; whereas in temperate and boreal regions, forestry and wildfire are the major causes of deforestation. 

And despite commitments both from the governments and private sectors to halt deforestation, signs of slowdown are minimal. 

Unfortunately, there is no IPCC pathway to limit global warming to 1.5°C without immediate action taken to halt deforestation. And ending deforestation is possible, in theory, through non-financial measures, says the report, which include:

A major reduction in the consumer demand for products that drive deforestation (e.g. meat and palm oil). Pasture for beef accounts for 40% of deforestation in tropical forests. 
The development of alternative businesses which can profit from standing forests such as eco-tourism and sustainable agroforestry.
Government actions to make deforestation illegal, if combined with effective enforcement.

Though feasible, these actions are time-consuming, offer partial solutions, and tend to be effective only in the short-run. 

Hence, to address these concerns, concessional/grant payments are critical to offset them by paying landowners enough money to cover the cost of the economic opportunity lost and buy some time before policy changes are in place, the ETC said. 

Adair Turner, ETC Chair, remarked that:

“Without a significant flow of concessional/grant payments, any reduction in deforestation will come too late to make it possible to limit global warming to well below 2°C, let alone to 1.5°C. But finance alone cannot deliver an end to deforestation. Action to reduce the fundamental consumer demands which are driving deforestation are also essential – and must be a priority for governments, business and consumers.”

How Much Money is Needed? 

The ETC analysis distinguishes two different categories of financial flow:

Capital investment in the technologies and assets: important to create a zero-carbon economy by 2050. In principle, these investments can deliver a positive return to investors and lenders. Around $3.5 trillion a year is likely needed on average between now and 2050. 
Concessional/grant payments: for decarbonization actions which are critical to limiting warming to 1.5°C, but won’t happen fast enough without payments to economic actors to compensate for lost profit opportunities. These will help phase down coal generation earlier than is economic, limit deforestation, and pay for removing CO2 from the air. Around $300 billion a year is necessary in middle and low-income countries.

The concessional financing will come from these three sources: 

Voluntary carbon credit markets 
Philanthropists
High-income governments

By using the IPCC data on deforestation, the report concludes that the cost of protecting all forests at high risk of deforestation by 2030 would be so big – at least $130 billion each year

The $130bn is a 50x increase from what is paid today to forest protection through carbon credits. Currently, financing to protect forests is only $2 – $3 billion a year

Moreover, the report shows that the current price of carbon credits for avoided deforestation (REDD+) is not enough to cover the marginal cost of avoiding commodity-driven deforestation.

The report presents an ambitious yet feasible financing strategy from each of those three fund sources. The analysts further address the issue of ensuring that carbon credits for avoided deforestation really deliver on their promised reductions. They refer to the standards for integrity in carbon markets – Core Carbon Principles – set by the Integrity Council for the VCM.

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Apple Invests another $200 Million in Carbon Removal Credits

Apple had doubled its investment up to $200 million to expand its Restore Fund, also doubling the tech giant’s commitment to promoting carbon removal. 

The project, which is between Apple and partners including Conservation International, is funding nature-based carbon removal projects.

What is Apple’s Restore Fund?

Apple’s Restore Fund was launched in 2021 with an initial commitment worth $200 million from the company and its partners, Conservation International and Goldman Sachs.

It was part of Apple’s roadmap to be net zero for its entire supply chain and life cycle of every product by 2030. To achieve that, the company aims to lower all emissions by 75% by the same period and offset any remaining emissions with high-quality carbon removal credits.

The world’s largest tech company created the Fund to encourage investments into protecting and restoring critical ecosystems and scale nature-based carbon removal solutions. Through high-quality carbon credits the projects generate, help businesses deal with their residual emissions that they can’t yet reduce or avoid.

In addition to the initial $200 million, Apple will invest another $200 million in the Fund to expand it. Climate Asset Management, a joint venture of Pollination and HSBC Asset Management, will manage the new investment portfolio.

The new portfolio is also looking to remove 1 million metric tons of CO2 per year while aiming to generate a financial return for investors. 

For company suppliers-turned-partners in the fund, the portfolio will give them the means to decarbonize through high-impact carbon removal projects.

Commenting on the announcement, VP of Environment, Policy, and Social Initiatives, Lisa Jackson noted that:

“The Restore Fund is an innovative investment approach that generates real, measurable benefits for the planet, while aiming to generate a financial return… The path to a carbon neutral economy requires deep decarbonization paired with responsible carbon removal, and innovation like this can help accelerate the pace of progress.”

Apple and its partners are partnering with forestry managers for sustainable forest management for optimal carbon and timber production. Their work creates not just revenue from the timber but also from high-quality carbon credits. 

With the additional $200 million, the Restore Fund is set to grow with a new portfolio of carbon removal projects

Advancing a New and Unique Model for Carbon Removal 

Carbon removal is vital to mitigating climate change and reaching global climate goals, as highlighted by the scientific body, IPCC.

Apple and Climate Asset Management are taking a unique approach to prospect projects, pooling two different types of investments: 

nature-forward agricultural projects that yield revenue from sustainably managed farming practices, and 
projects that restore critical ecosystems that remove and store CO2. 

The goal of this unique blended fund structure is to achieve both financial and climate benefits for investors. All the while promoting a new model for carbon removal that addresses the potential for nature-based solutions. 

All investments in the Restore Fund are subject to stringent social and environmental standards.

Carbon Removal Investments for Apple’s Climate Goal

Apple has already achieved carbon neutrality for its corporate operations last year. But the leading tech also called on its suppliers to do the same across its operations by 2030. And that includes both their Scope 1 (direct emissions) and Scope 2 (electricity-related) emissions.

Achieving its ambitious climate goal is possible by offsetting Apple’s unavoidable emissions with high-quality carbon removal credits. 

Suppliers can cut their emissions by abating direct carbon footprint, improving energy efficiency, and shifting to using renewable energy. As progress of this advocacy, Apple revealed that 250+ of its manufacturing partners also pledged to use 100% renewable energy to power their production by 2030. 

The previous investments that the tech firm committed along with Conservation International and Goldman Sachs were in Brazil and Paraguay. Example of a Restore Fund project in Paraguay shown below involves a sustainably managed timber farm on one side of the road, and a preserved natural forest on the other side.

Source: Apple website

These carbon reduction projects will restore 150,000 acres of sustainably certified forests and protect another 100,000 acres of native forests, grasslands, and wetlands. They aim to remove 1 million Mt of CO2 from the atmosphere each year by 2025. 

Monitoring Investments Impact 

For accurate measurements and monitoring of the Restore Fund projects’ impact, Apple is using advanced remote sensing technologies. These include the Upstream Tech’s Lens platform, Maxar’s satellite imagery, and Space Intelligence’s Carbon and Habitat Mapper. Together, they help the company create forest carbon maps of the project areas. 

Apple also explores using LiDAR Scanner on iPhone to further improve monitoring capabilities on the ground. 

The detailed maps those tech produce will help ensure that projects meet Apple’s high standards before investments are made. They’re also important to quantify and verify the carbon removal impact of the projects over time.

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STX Group Closes €150M Credit Facility from Global Banks

Amsterdam-based STX Group raises 150 million Euros from environmental commodities, marking the first time the banking sector backs this innovative credit facility vital for the energy transition.

Who’s The STX Group?

The STX Group is a leading global environmental commodity trader and climate solutions provider. The group is based in Amsterdam, Netherlands, with ten offices globally. It has an annual trading volume of over €4 billion. 

The global trading company offers a wide range of innovative solutions to help businesses and organizations in their transition. It has a track record in pricing carbon emissions, creating trust in providing market-based carbon reduction solutions. 

After acquiring Vertis and Strive in December 2021, the trader now has a diverse team of about 500 employees from 50+ countries. 

STX ensures that money flows to thousands of projects that help the world transition to a low-carbon economy with its trading and Corporate Climate Solutions offerings. It provides access to a wide range of products and solutions to reduce carbon emissions such as:

The firm also gives corporations certificates as proof of their efforts in making the planet greener. Customers can choose verified emission reductions (VERs) or voluntary carbon credits from thousands of projects worldwide, with these technologies:

Afforestation
Reforestation
Cookstove
Biomass Cogeneration
Wind Power
Hydro Power
Energy Efficiency
Solar Power
Recycling
Biogas
Biodigesters

The company provides carbon offset solutions with labels from the VCS (Verified Carbon Standard), the CDM (Clean Development Mechanism), Gold Standard, the Climate, Community & Biodiversity (CCB), and the REDD+ Business Initiative.

STX €150 Million Credit Facility

STX credit facility is considered oversubscribed, featuring the unique quality of having a partial security from a diverse portfolio of environmental commodities. 

Remarking on the announcement, STX’s Chief Financial & Risk Officer, Bart Wesselink said that:

“With the energy transition in the heart of STX, we have been in the business of decarbonization for a long time, and are therefore pleased to see a group of mainstream global banks finally recognizing the underlying value of the wider range of environmental commodities.” 

The group expects that this facility will fuel the rapid expansion of its business operations, particularly its borrowing power. Half of the €150 million funding (€75m) is a committed portion while the other half has an uncommitted accordion feature. 

The facility is supported by a syndicate of globally renowned banks, leaders in the field of commodities trade financing. The company, however, didn’t name them.

Historical Support from the Banking Sector

The fundraising by STX marks the first time that the banking system supports this kind of financing facility. 

Wesselink added that the banks’ willingness to take part in their credit facility is a pivotal step for the industry. It provides more “access to financing and promotes a level playing field” for those who wish to contribute to the energy transition. 

Just last year, major banks were criticized for neglecting shareholders’ plea to put an end to fossil fuel financing. They prefer to continue supporting “dirty” projects that burn fossils than advance their climate goals. 

But there are a few that made a braver move to stop direct funding of fossil fuels like Lloyds Bank. They set the trend towards sustainable banking. 

By the end of 2022, climate commitment from four major banks reached a total of $5.5 trillion. They include HSBC, Barclays, JPMorgan Chase, and Citigroup.

According to STX CFO, the financiers used to accept biofuels and financial instruments such as the EU carbon credits (EU Emission Allowances, a.k.a. EUA) as collateral for borrowed funds. 

But under STX new credit facility, it’s the first time that the banking sector accepts other environmental commodities like Guarantees of Origin and Renewable Gas Certificates as collateral. It seems that the banking community is also picking up the pace of the global phenomenon of energy transition.

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What are Scope 3 Emissions and Why Disclosure is Important?

Investors were used to looking for companies to cut only their operational emissions and indirect emissions from energy purchases. But now they’re focusing on the entire business supply chain, meaning Scope 3 emissions are becoming more significant. 

This trend puts emissions from the value chain at the spotlight. But why is it important to account for this type of carbon emissions and why its disclosure is a must? 

This article will explain everything you need to know about Scope 3 emissions and the importance of disclosing and accounting for them.

The Importance of Evaluating Scope 3 Emissions

Scope 3 emissions, which include indirect emissions from a company’s value chain, often represent the largest portion of corporate-related emissions. But companies often neglect to disclose these emissions or simply mention them without enough details. 

The lack of transparency leaves investors in the dark when assessing the real climate risk exposure of their portfolios.

Good news for investors in the US, the EU, and New Zealand. Regulators in these countries proposed a mandatory Scope 3 emissions reporting for listed companies. 

Even the central banks are feeling the weight of this matter as they’re starting to take climate exposure into consideration. 

This growing awareness and increasing regulatory interest will likely lead to more Scope 3-related policies in the coming years.

Accounting for Scope 3 emissions is very flexible as they tend to be self-imposed. Yet, it’s still difficult to compare data across companies because of the varying emissions profiles even within sectors. 

Unfortunately for investors, companies often omit significant Scope 3 categories without providing transparent reasons for doing so. This is why stricter rules on disclosure are coming up, prompting large companies to start accounting for value chain emissions. 

Investors can use value chain emissions as an indicator of transition risk and gauge a company’s true climate ambition. 

After all, assessing exposure to carbon-intensive activities in value chains and products is critical for investors. It can help them expect any potential impacts on asset values and operating costs. 

So, it’s just reasonable for investors to demand more comprehensive and transparent Scope 3 disclosures and scrutinize them more closely. Doing so will help them better understand overall climate risk and identify potential greenwashing.

Scope 3 Emissions and the Greenhouse Gas Protocol

Scope 3 emissions, as defined by the Greenhouse Gas Protocol (GHG Protocol), cover all indirect emissions from a company’s value chain that are not owned or controlled by the company itself. These emissions extend beyond the direct operations (Scope 1) and purchased energy (Scope 2) emissions of a company. 

The GHG Protocol is a collaboration between the World Resources Institute and the World Business Council for Sustainable Development. It sets global greenhouse gas accounting and reporting standards, such as The GHG Protocol Corporate Accounting and Reporting Standard and The Corporate Value Chain (Scope 3) Standard. These standards are widely adopted by corporations and regulators. 

In 2016, 92% of Fortune 500 companies responding to the CDP climate questionnaire used GHG Protocol standards either directly or indirectly.

The GHG Protocol breaks down Scope 3 emissions into 15 distinct categories, covering both upstream and downstream activities. 

Source: GHG Protocol

Companies determine their own Scope 3 boundaries and report based on the categories’ relevance and materiality to their business. This can result in varying emissions profiles even among companies in the same sector. 

The differences in emissions profiles present a significant challenge in addressing this type of emissions. For instance, Alphabet considers emissions from downstream leased assets as “not relevant,” while Microsoft includes them in its emissions disclosure, despite their similar business nature.

In essence, it still depends on a company how it would regard a specific category. It’s up to them if the emission is material or not and relevant or irrelevant. In this case, providing enough disclosure details on emissions sources becomes even more important.

The Need for Improved Disclosure

Scope 3 emissions often represent the majority of corporate GHG emissions. 

For example, oil companies’ Scope 1 and 2 emissions are a small fraction of their total emissions, while the consumption and combustion of their products account for most emissions. 

In fact, CDP estimates that Scope 3 emissions make up 75% of related GHG emissions across all sectors. In the financial sector, financed emissions can be over 700 times greater than operational emissions.

Undeniably, emissions from the value chains have substantial impact but they are underreported or ignored most of the time. Large polluters simply claim that they have “no influence or control” over them. It is, thus, not surprising that Scope 3 emissions have lower disclosure rates than the other two emissions types. 

Big companies like those included in the S&P Global 1200 index face more pressure to disclose their sustainability performance. Despite this, the overall Scope 3 disclosure rate across the wider market is likely much lower.

Add to that the fact that many businesses don’t provide a detailed breakdown of their value chain emissions, preventing investors from understanding the full extent of climate risk exposure along value chains.

The number of reported categories may offer some insight into the completeness of corporate disclosure. But there is still significant room for improvement in both the quantity and quality of Scope 3 disclosures. 

Improved reporting will enable investors to better identify sources of emissions and potential solutions, ultimately contributing to a more accurate assessment of climate risks.

Why Net Zero Targets must Include, not Ignore Scope 3

As the momentum for net zero commitments grows at both the national and corporate levels, many companies still fail to address Scope 3 emissions in their climate pledges. 

Over 40% of corporate net zero targets do not cover Scope 3 emissions, even if they often represent the largest share of GHG emissions. Only 18% of companies in Net Zero Tracker’s survey of 2000 large, publicly-traded companies have set Scope 3 reduction targets.

Source: Net Zero Tracker 2022, HSBC

The Science Based Target Initiative requires a Scope 3 target if a company’s relevant Scope 3 emissions are 40% or more of related GHG emissions. This is to ensure that corporate emission reduction targets are in line with the latest climate science. 

Neglecting Scope 3 emissions in climate commitments not only weakens the overall climate strategy but also raises concerns about greenwashing.

For instance, Exxon Mobil faced criticism for its net zero announcement in January 2022, which included Scope 1 and 2 emissions while excluding Scope 3 emissions. 

Similarly, Brazilian meatpacker JBS reported flat emissions over 5 years. But the Institute for Agriculture and Trade Policy disagreed, saying that JBS’ emissions actually increased by 51% during that period. The NGO claimed that JBS ignored its supply chain emissions in its disclosures and commitments, thereby guilty of greenwashing.

Considering the huge impact of these emissions, it is crucial for companies to include them in their net zero targets to effectively address climate risks and avoid greenwashing.

Not to mention the potential legal consequences they may face considering climate policies’ growing focus on value chain emissions.

Including Scope 3 Emissions in Climate Policies

Regulators are increasingly focusing on Scope 3 emissions, with some markets already implementing mandatory disclosure requirements:

US: The SEC requires publicly listed companies to disclose Scope 3 emissions if material or included in their GHG reduction goals. US funds will have to report the GHG footprint of their portfolios.

EU: The EBA plans to require banks to disclose financed Scope 3 emissions starting July 2024. The European Commission proposes all large and listed companies to report in compliance with the European Sustainability Reporting Standards (ESRS), which require Scope 3 emissions disclosure.

New Zealand: The External Reporting Board proposed mandatory Scope 3 disclosure, emphasizing the need to cover the entire value chain.

Singapore: Singapore Exchange requires listed companies to report Scope 1, 2, and 3 emissions when appropriate.

The Disclosure Club and Climate Litigation

More jurisdictions will join the “mandatory disclosure club,” especially as the International Sustainability Standards Board (ISSB) includes Scope 3 emissions in its draft climate-related disclosure requirements. The official standards, expected by the end of 2022, could catalyze wider adoption of reporting standards and policy requirements for Scope 3 emissions.

Moreover, climate stress tests by central banks now include value chain emissions as a climate risk metric. Examples are the European Central Bank (ECB) and the People’s Bank of China (PBoC). Banks with high exposure to climate risks may face higher capital reserve requirements.

Climate change-related litigation is also on the rise, with some cases focusing on Scope 3 emissions. They have been brought into the courts, such as the case with Royal Dutch Shell. The court obliged Shell to reduce emissions relating to its entire energy portfolio, including value chain emissions. 

The case makes it even more important for investors to be aware of the legal risks associated with value chain emissions and their significance in climate risk assessments. 

Carbon pricing mechanisms rarely apply to Scope 3 emissions; but they can impact the costs of companies with high value chain emissions, such as those in the real estate sector.

Accounting for Scope 3 Emissions

Accounting for Scope 3 emissions becomes even more challenging due to the discretion allowed in selecting relevant categories, data availability, and sector applicability. But understanding of Scope 3 emissions is growing, and a more nuanced approach to disclosures will soon evolve.

Despite the more challenging accounting for value chain emissions, it shares the same principles as Scope 1 and 2 emissions. The major difference is the identification of relevant activities and boundary setting.

In general, here’s the overview of the steps involved according to GHG Protocol:

Overview of Steps in Scope 3 Accounting & Reporting

Key points when accounting for emissions from value chain:

Flexibility in selecting relevant  categories can make calculations, analysis, and comparisons challenging. Companies may exclude categories that are actually material to their business.
Timing of emissions adds complexity to Scope 3 accounting, as some emissions occur in the current year, while others may have occurred in the past or are yet to occur.
Double counting may occur as Scope 1 and 2 emissions for one company can be Scope 3 emissions for another. Aggregating Scope 3 emissions across companies or subsidiaries should be avoided.
Scope 3 emissions are more relevant to some sectors than others, and disclosure rates can provide an indication of relevance.

Overall, instead of aggregating across several companies, investors and companies should focus on analyzing Scope 3 emissions at an individual company level to determine exposure. This approach will offer a more complete picture of a business’s overall exposure to potential climate risks and impacts.

The post What are Scope 3 Emissions and Why Disclosure is Important? appeared first on Carbon Credits.

Abatable Receives $13.5M from Azora and Acquires Ecosphere+

A London-based carbon procurement and market intelligence tech firm, Abatable, secured $13.5 million in funding from Azora Capital and fully acquired a nature-based carbon credits provider, Ecosphere+.

Founded in 2016, Ecosphere+ seeks to create and build demand for high-impact voluntary carbon credits. The company’s portfolio strategies enable other businesses to take action and integrate carbon credits into their net zero plans.

Operating since 2003, Azora Capital is an investment management and private equity firm based in Spain. It has over €6.5 billion in assets under management (AUM). Azora’s European Climate Solutions private equity strategy supports and provides growth capital to companies that bring decarbonization solutions.

Remarking on the fundraising, Abatable CEO and Co-founder Valerio Magliulo said:

“We are thrilled to have the support of Azora as we accelerate our growth plans to support an increasing number of businesses taking climate action for their hard-to-abate emissions.” 

Creating the Largest Tech-enabled Carbon Procurement Platform

Abatable’s carbon procurement platform allows entities to connect and transact with carbon project developers to deliver their ambitious climate goals. The firm’s mission is to help companies deal with their hard-to-abate carbon emissions in two ways:

Execute science-aligned carbon procurement programs
Deliver long-lasting and measurable environmental and social impact beyond value chains

Carbon credit buyers can pick from a selection of pre-built thematic portfolios or create their own to align with climate goals. Here’s an example of a thematic portfolio in Abatable carbon credit marketplace:

Its tech platform helps bring transparency and efficiency to the voluntary carbon market (VCM). It also gives entities access to 2,000+ project developers across different project types and geographies while providing them effective ways to buy carbon credits.

By acquiring Ecosphere+, Abatable will be expanding its services to a wider reach of corporate clients. The company will also benefit from Ecosphere+’s proven track record and data, transacting over 45 million carbon credits.

Ecosphere+ is a provider of nature-based carbon credits with projects focusing on reforestation and reducing deforestation while supporting local communities. The company offers solutions that turn carbon markets into effective financing tools needed in the race to net zero. 

Abatable said that they’re “excited to combine their [Ecosphere+] access and expertise with our digital solutions to establish the largest tech-enabled carbon procurement platform.”

For Ecosphere+, the new team up will further propel their joint reach and impact in scaling action for climate, nature and people.

Driving Climate Solutions at Critical Times

The $13.5 million investment from Azora is the second deployment coming from its European Climate Solutions private equity strategy. It specifically targets companies that provide decarbonization solutions for the European economy.

The deal comes at a critical time for the VCM that can help speed up its development through a trusted mechanism for climate solutions. 

Here’s how Abatable platform works for corporates with complex carbon procurement needs in 7 steps.

Define procurement requirements
Identify matching carbon projects
Submit a Request for Proposal
Leverage Abatable’s quality insights
Construct the optimal portfolio
Use standardized procurement contracts
Communicate and monitor your impact

Boom and Busts

The VCM is at a critical point. There has been a boom in market size and interest from various organizations across industries. Projections show that the market will grow to reach $50 billion by 2030 and a 100% increase by 2050.

But the VCM also received serious busts about its integrity. There are valid concerns on the quality of nature-based carbon credits verified by major standards.

Meanwhile, the carbon markets need to scale to ensure that net zero is possible and the window of opportunity is closing. Abatable is working with businesses around the world across industries, supporting high-impact projects that produce high-quality carbon credits. 

The company helps businesses source, vet, and structure their long-term carbon procurement programs. The goal is to help deliver measurable carbon reductions along with environmental and social impacts.

Apart from the Ecosphere+ acquisition, the funding from Azora will let Abatable reach out and support more entities achieve their net zero plans. 

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