Clean Power Hit New Record in 2022 Global Electricity Generation

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Clean power sources reached a new record 12% of global electricity generation in 2022 while experts say that the power sector’s emissions may have peaked.

Electricity emissions went up by 1.3% in 2022, hitting a record high as per Ember’s report. This is due to a small increase in coal consumption to meet the rising demand for power following the end of the pandemic lockdowns.  

Meanwhile, coal generation grew by 1.1% only in the same year. 2022 was also the year for things electric, e.g. electric vehicles, electrolyzers, and heat pumps and this trend will continue. 

But to deliver on the required carbon emissions reductions, it should be coupled with enough investments in clean electricity transition.

The Era of Clean Power

According to the energy think tank Ember, the global electricity sector’s carbon footprint may have peaked last year and it will begin to fall in the coming years. This prediction sends a signal that the sector was at its tipping point to shifting to clean power. 

In its recent report, Ember found that deployments of renewable energy in 2022 drove wind and solar to reach a new record of 12% share in the electricity mix. It went up from 10% in the previous year. 

Together, all clean electricity sources – renewables and nuclear – reached 39% of global electricity, a new record high.

All these caused the carbon intensity of global power to hit a record low of 436 gCO2/kWh, the cleanest-ever. 

The report covered 2022 data gathered from 78 countries, comprising 93% of the world’s electricity generation. 80% of the increase in demand for electricity after the lockdowns was met by clean power, particularly wind and solar. 

The report’s lead author, Małgorzata Wiatros-Motyka said that:

“In this decisive decade for the climate, it is the beginning of the end of the fossil age. We are entering the clean power era…Clean electricity will reshape the global economy, from transport to industry and beyond.”

The rapid growth in clean power use will sustain in 2023 and the following years, the report says. And that would be enough to see that the sector’s carbon emissions will plateau or decline next year. 

That happens if clean energy developers and governments continue to support generation of cheap green power. 

However, the author also noted that it still depends on how businesses and individuals “put the world on a pathway to clean power by 2040.” 

The global electricity sector is the largest emitter. And it’s the first sector that has to decarbonize for the world to achieve net zero because it helps unlock electrification in other sectors. 

Net Zero Power by 2040

According to the International Energy Agency (IEA), the power sector must be net zero by 2040 to bring the world to net zero economy-wide by 2050.

In the IEA Net Zero Emissions (NZE) modelling, wind and solar are the key drivers, providing 75% of the growth in clean power from now to 2050.

By 2030, wind and solar have to increase to 41% of global electricity generation. By the same year, coal generation has to decrease by 54% while gas by 24%.

Electricity demand, however, will continue to rise significantly by about 3.7% annually until 2030 as electrification intensifies. 

Here’s how Ember forecasts the power sector’s transition to its 2040 net zero emissions. 

Investment in clean power is critical, not only in the sector but the whole energy generation to ensure that the path to net zero is taken. 

Remarkably, investment in clean energy technologies in 2022 is the same as that of fossil fuels for the first time. This is a good sign but investments must triple by the end of this decade to be on track for 1.5C.

Developing countries received financial support from large emitters such as the EU, UK, and US. The funds help them displace the dirty coal with clean renewable sources. 

Yet overall, fossil fuel generation still increased in 2022 by 183 TWh. This led to the power sector’s CO2 emissions to grow by 160 million tonnes. 

While the global electricity’ emissions intensity is heading towards the right direction, its absolute emissions are yet to fall. This shows that the power sector hasn’t reached yet the point where emissions reductions are at the net zero level.

As per the IEA NZE scenario, the sector’s emissions should decline by about 7.6% each year until 2030. 

Some industry experts agreed that Ember’s forecast might be attainable. But others said that it will take more years to become a reality, not this year or the next. 

Whoever holds the right prediction depends on how commercial and political forces play in the transition to a low-carbon power. 

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First Carbon Credit Methodology for Seagrass Developed in France

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A collaboration among four organizations created the first carbon credit accounting methodology in Europe for protecting seagrass beds that have a key role in mitigating the climate, and thus, allowing French companies to use the credits to offset emissions.

EcoAct, Digital Realty France, Schneider Electric France and the Calanques National Park work together in developing the said methodology. 

EcoAct is an international climate consultancy and project developer, supporting companies in setting net zero strategies and achieving climate targets. 

The Calanques National Park is Europe’s only national park that sprawls on land, sea and suburbs. It is one of the world’s biodiversity hotspots and is home to 200+ protected species both on land and at sea.

First Carbon Accounting for Seagrass Bed 

The first low-carbon methodology for the seagrass bed protection in Europe is a result of a research project called the “Prométhée-Med”. Implementing the project can sequester about 24,000 tCO2e per year. 

The crediting methodology in place will help ensure that the project can indeed reduce carbon emissions backed by science. It will also play an important role in preserving a key natural habitat of the Mediterranean, which is a critical carbon stock – the Posidonia meadows. 

Posidonia meadow in Mediterranean

The seagrass carbon credits system gained the approval of the French Directorate General for Energy and Climate (DGEC).

Moreover, the project can help preserve the coastline because seagrass beds may prevent or slow down coastal erosion. Plus, the marine ecosystem where seagrass beds are a key habitat in the Mediterranean.

Commenting on the project, Director of EcoAct, Emilie Alberola said that:

“This project is the concrete proof that public-private partnerships can leverage technical expertise, such as that carried out by EcoAct’s teams, and help advance the protection of marine biodiversity through innovative financing mechanisms.”

Apart from the support of the four major players, the seagrass carbon credit project is based on the results of various academic and scientific institutions. These include the University of Corsica Pasquale Paoli, the GIS Posidonie – Corsica Centre, and the Mediterranean Institute of Oceanography (MIO) – Aix-Marseille University.

Seagrass’ Role in Regulating the Climate

So, why protect the seagrass beds?

Primarily because they play a vital role in regulating the climate and preserving global biodiversity. They are also very productive and diverse, providing important ecological functions. 

Seagrass beds take less than 2% of the total surface area of the seas, providing home to as much as 18% of marine species.

More notably, the Posidonia meadow, is known for its carbon sequestration qualities. It can store as much as 700 tonnes of carbon per hectare.

That means the meadow has 5x more carbon storage capacity than tropical forests. Not to mention that seagrass beds can also support coastal fisheries and act as a water filter.

However, many factors led to the loss of seagrass beds such as pollution and climate change. A decaying underwater meadow also means a destroyed carbon stock. 

This is why the new methodology for seagrass carbon credits is crucial to avoid further loss and destruction. These credits are also known in general as the blue carbon credits.

The Benefits and Challenges of the New Methodology

The Prométhée-Med project identifies some potential benefits and hurdles to help France reach its climate goals. These include the following:

Surface area – 80,000+ hectares
Regression rate – 0.29% a year
Carbon stocks – 327 tonnes of CO2 per hectare
Carbon reduction potential – 24,000 tCO2e a year or 700,000 tCO2e over 30 years for 80,000 ha.

In comparison, other low-carbon projects can reduce about 465,000 tCO2e.

More remarkably, the project touches on some social and economic benefits. The new carbon crediting system for seagrass can create more jobs, raise more awareness about meadow protection, and set up rules for anchorage (ship anchors destroy seagrass beds).

The Posidonia meadows is a key Mediterranean habitat and is a marine protected area but it hasn’t been the case. The Mediterranean Maritime Prefecture has implemented regulations on protecting the ecosystem, which they are further strengthening now.  

With the approved methodology, the National Park is working on a project that will enable the developer to make the carbon market as a beneficiary. 

The seagrass carbon accounting aligns with the industry need to provide high-integrity carbon credits as outlined in ICVCM’s Core Carbon Principles. 

By putting in place strong standards, it will drive enough investments highlighting the important role of carbon markets in providing net zero solutions.

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Meta, Bank of America, JPMorgan Chase to buy SAF Credits

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The Sustainable Aviation Buyers Alliance (SABA) members will buy sustainable aviation fuel (SAF) certificates or credits, allowing entities to buy scope 3 emissions credits.

For the first time, major companies such as JPMorgan Chase, Bank of America, Meta, Boston Consulting Group, Boom Supersonic, and non-profit RMI join together to buy credits for about 850,000 gallons or 2,576 tons of SAF. 

The biofuel will power JetBlue flights this year.

This first joint procurement is a leap forward from SAF credits purchases by companies in the past. Industry experts believe this will dramatically boost the demand signal that customers send to the SAF credits market.

Commenting on the historic purchase, head of Net Zero Strategy at Meta, Devon Lake said:

“SAF certificates enable corporate aviation customers like Meta to credibly and transparently contribute to decarbonizing the aviation sector. Buying SAF through SABA‘s collective procurement process allows us to go one step further and send a strong and coordinated demand signal to the market.”

What’s the Sustainable Aviation Buyers Alliance?

The Sustainable Aviation Buyers Alliance or SABA is a joint initiative of clean energy non-profit MRI and the Environmental Defense Fund aimed at speeding up the path to net zero aviation by attracting investment in SAF. 

According to MRI, they started working on the concept of SAF credits and market demand signals in 2019. The first procurement is a culmination of that effort. 

The alliance’s founding members are large companies, including JetBlue, Boston Consulting Group, Boeing, JPMorgan Chase, Bank of America, Microsoft, Netflix, Deloitte, and Salesforce.

SABA’s work involves this three major areas:

Education and policy support: by helping members explore the technical attributes of SAF and its market, policy landscape and aviation emissions accounting
Technology innovation: by evaluating novel SAF technologies and working with like-minded organizations to manage barriers to entry
Investment opportunity: by establishing a transparent SAF crediting system that enables not just operators but also flyers to invest in high-quality SAF to achieve their climate goals

Net Zero Aviation with SAF

The SAF that the SABA members will buy is produced by World Energy, working to make net zero real. World Energy is currently producing 144,000 tons per year of SAF in Paramount, California.

The organization has a refinery that will go online at the same site with a capacity of 576,000 tons a year. It has a bigger plant that will start operating in 2025 in Houston, Texas, capable of producing over 700,000 t/yr.

Why SAF?

SAF is a drop-in fuel made with renewable or waste materials that can significantly reduce the carbon emissions of air travel. It has the potential to cut down the carbon intensity of flights by around 84% or 8,500 tons. 

However, SAF makes up only 0.1% of the global aviation fuel supply and has a premium price compared with conventional fossil jet fuel. That is because of insufficient, disaggregated demand and cost barriers to SAF production. 

Each SAF certificate or credit is equal to one ton of biofuel produced. 

In the U.S., about 1 billion tons of biomass can be collected each year to produce 50 to 60 billion gallons of biofuels like SAF. The biomass sources vary, including:

Corn grains
Oil seeds
Algae
Agricultural and forestry residues
Municipal solid waste streams
Wood mill waste
Wet wastes and other fats, oil, and grease

Companies buying SAF credits will pay some or all of the premiums associated with SAF. And their purchases will help pursue decarbonization efforts that directly slash CO2 emissions in the aviation sector. 

Also, SAF credits will deliver the following functions:

Standardization and transparency for accounting and reporting certified carbon reductions
Critical funding to boost SAF purchases
Promote the production of high-integrity SAF, making the biofuel more competitive relative to conventional fuel

SABA will launch its 2nd competitive process where it plans to buy SAF credits across a 5-year period. The organization expects to grow its annual demand by over 10x this second time compared to the first procurement.  

The second process will be open to all fuel providers and airline operators. 

SABA members will also pilot a new digital registry to bring more transparency, consistency, and integrity for SAF credits. This is crucial to build trust in the system and convince more companies to buy the certificates.

The estimates by the International Air Transport Association (IATA) show that SAF will account for 65% of mitigation needed by aviation. And the industry expects this to grow even more as the world economy races to net zero.

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Billionaire Tom Steyer to Invest in Net Zero Buildings

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Galvanize Climate Solutions, an investment arm of a company owned by billionaire Tom Steyer, plans to buy apartments and buildings across the U.S. and upgrade them to be net zero in three years.

The philanthropist and climate activist’s plan will start this summer, with the goal to reduce the portfolio’s carbon emissions and bring it to net zero by improving energy efficiency.

A New Model for Climate Investing 

Joseph Sumberg heads Galvanize Real Estate and is from Goldman Sachs. He commented on the firm’s plan saying:

“This is a real estate strategy with a decarbonization goal… Capitalism will look at this successful strategy, and replicate it, creating ripples through the built environment.”

Sumberg and Galvanize, a company co-founded by two stalwarts of Bay Area finance, Steyer and Katie Hall, will invest billions of dollars into the plan. But they didn’t disclose how much exactly their investment would be. 

Sumberg, however, noted that it will be sizable and focus on markets in the Pacific Northwest, Colorado, California, Arizona, and Texas.

Steyer said that their plan of upgrading properties in line with Net Zero is not only good for the planet. It is also a good investment from a financial perspective. He also added that:

“The impact and the returns are linked; it’s not a trade-off. We are trying to create a new model for climate investing.”

Their goal is to employ a strategic asset acquisition and will follow proprietary ways to retrofit buildings. They will also add solar panels as a renewable source of energy for buildings. Doing so allows the investment arm to have a portfolio of energy-efficient buildings that will pay off in the long run. 

The team that makes up the investing unit will have incentives and compensation that are linked to the plan’s sustainability targets.

Galvanize seeks to focus on acquiring these real estate properties:

Student Housing
Self-storage
Industrial properties
1 to 3-story, low-density multifamily residential properties with parking 

The team will perform significant upgrades to the properties and will install solar panels for reduced energy and carbon footprint.

The investment arm will do that with the help of the company’s in-house tech experts and scientists. The team includes an energy expert and scientist Howard Branz. 

Their approach provides a way to invest where investors will enjoy risk-adjusted returns as well as climate benefits, says Sumberg. If both aspects – financial return and environmental impact – are not met, they will stop the deal. In his words, “if we don’t get to net zero in three years, we forfeit those incentives.”

Greening Real Estate and Bringing it to Net Zero

Buildings consume 40% of energy and 70% of electricity produced in the U.S.

They also account for about 40% of annual global greenhouse gas (GHG) emissions and 12% of direct GHG emissions in the U.S.

So, making real estate greener is a must for achieving climate goals. In fact, it has been a huge criterion in making big investment decisions. 

There are different terms used to describe buildings that are on a path to Net Zero. According to the World Green Building Council, here’s what a net zero carbon or net zero energy building looks like:

Source: World Green Building Council

Recently, states’ climate programs are putting a limit on how much carbon buildings are allowed to emit. Add to that the growing investors’ interest in ESG investing. 

Take for instance the case of BlocPower, a New York-based company backed by Microsoft’s Climate Innovation Fund and Goldman Sachs. The firm secured a $155 million investment to expand green building retrofits. The tech startup has started its energy retrofitting model to 5,000+ apartments and buildings. 

Another firm, RENU Communities also has a portfolio of over 2,800 housing units. It’s a subsidiary of Taurus Investment Holdings, which seeks to also green the real estate industry by reviewing properties. They check out designs, energy audits, and existing infrastructure to determine if they need some retrofits. 

Galvanize joins these companies looking to green and decarbonize American buildings at scale. 

More than 50% of apartments across the country were built before the 1990s. It means they most likely need some upgrades to boost energy efficiency. 

From an investor’s point of view, energy-efficient retrofits are a must-have and become one of the real estate valuation criteria. 

For Galvanize, it would be a first-mover advantage amid rising property rates and uncertainties. That means the firm would be in a better position to invest in assets that are worth upgrading and hence, avoiding non-performing properties. 

Parking companies are also joining the retrofits and the race to net zero within the built environment. Installing chargers for electric vehicles in parking lots is one strategy for greening buildings.

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Global Thermostat Launches One of the Worlds’ Largest DAC Units

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Global Thermostat unveiled one of the largest direct air capture (DAC) units in the world but the company is still working out what to do with the CO2 it captures.  

The huge commercial-scale DAC facility is operating in Brighton, Colorado with giant fans sucking CO2 directly from the sky. It is one of the world’s biggest DAC machines but the carbon it captures returns back to the atmosphere. 

Global Thermostat DAC facility in Colorado

Commenting on the launch, Global Thermostat’s CEO, Paul Nahi said:

“We are already in discussions with multiple partners about moving from kiloton to hundreds of kilotons in the next couple years and then shortly thereafter move to the megaton scale… We can avoid this [climate change]. There is still time. But we have to act now.”

Global Thermostat DAC Launch

Global Thermostat DAC project, which started operation in late 2022, can capture 1,000 metric tons of carbon each year. But the company is still looking for an off-taker for the captured CO2 that the machine is releasing back into the atmosphere right now. 

The off-taker can be another company that stores captured carbon underground or uses it to create products like concrete. 

The DAC company prioritizes getting the unit to work on a commercial scale. Other steps are still in progress such as where to store and transport the captured CO2. 

Global Thermostat’s DAC launch was attended by top government officials, including the state’s previous governor and representatives from the White House.

The Role of DAC in fighting climate change

Direct air capture is in its early stages and the existing technologies are still costly and energy-intensive to operate. But industry experts believe that DAC has a crucial role to play in fighting global warming and climate change. 

The recent UN climate report strongly indicates that the earth has to remove, on a gigatons scale, carbon and store it. But the report’s authors noted that carbon removal methods must work instantly and significantly cut GHG emissions. 

In the U.S., billions have been invested by the government in developing and constructing giant air filters. Investments from the private sector in carbon removal technologies are also soaring. And DAC has been the most popular removal technology that is gaining a lot of attention lately.

There are two key methods for direct air capture – liquid and solid systems. In a liquid DAC system, the air passes through chemical solutions while in a solid system, it goes through filter materials that bind with the CO2. 

Global Thermostat’s DAC unit uses the latter method through a process employing very efficient industrial fans and heat. 

The fans draw air through a series of honeycomb-like filters coated with a chemical mixture that binds to CO2. The filters are then injected with steam that pulls out the CO2 and releases carbon-free gas back into the atmosphere. The image below shows how this DAC machine functions.

Scaling up Carbon Removal with DAC 

To date, there are only 18 DAC plants built around the world. Together, they have a total capacity of removing 10,000 metric tons of carbon annually, says the International Energy Agency.  

In context, that’s the same as capturing the pollution of over 2,000 fossil fueled passenger cars each year. 

So far, the largest DAC project in operation is Orca developed by Climeworks in Iceland. The mammoth plant started running last year. It can suck in 4,000 tons of carbon per year, which is then injected deep underground where the gas turns into rock.  

Tens of thousands of tons of CO2 removal is still not enough, however, to limit the rise of global temperature to 1.5 degrees Celsius.

The world has to remove CO2 in gigatons (billion metric tonnes) annually – 10 gigatons by 2050. 

To help ramp up the deployment of DAC, the U.S. Department of Energy rolled out $3.5 billion to build 4 regional DAC hubs in the country. 

Moreover, the largest climate law, the Inflation Reduction Act, provided more incentives for DAC projects with expanded 45Q tax credit. The Act allows DAC developers to get $130 for each metric ton of CO2 they capture and use. Alternatively, they can earn $180 for every ton that they permanently store in a geologic formation.

Global Thermostat’s DAC unit is eligible for the tax credits by meeting its minimum requirements with a removal capacity of one thousand tons per year.

But the company has to work out the storage side of its carbon removal technology. 

In the meantime, the company does not have the capability to store the captured carbon at its site. The next move, therefore, is to find another firm that can do that. 

They are also planning to add a CO2 compressor system that will enable them to store and handle the gas. But that would be in the next phase of the project. 

There are also discussions about building a smaller Global Thermostat DAC unit in Chile for making fuels. The company’s future DAC machines can be bought by developers who sequester or use captured CO2. There are companies using it for making fertilizers, fuels, and carbonating drinks. 

Global Thermostat didn’t disclose how much power and heat its Colorado DAC facility consumes or where it sources the energy, but the firm stated that the amount of energy is insignificant.

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Big Firms Make their own Carbon Credits – GSK, Volkswagen, Total

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A number of large corporations decided to fund their own projects that generate carbon credits despite criticisms against offsets. 

GSK, Volkswagen and Total are just some of the corporate firms that continue to lean on carbon credits to offset carbon emissions.

Corporate Carbon Offsetting

One of the world’s leading pharma companies, GSK Plc, believes that carbon offsets are a crucial tool that moves capital needed for health, nature, and climate. As per the company’s director of sustainability partnerships and strategy, Adele Cheli:

“Just because it’s [carbon offsetting] not perfect doesn’t mean we’re going to step out. We’re going to lean in and make it better.”

Corporate carbon offsetting means a polluting company buys a carbon credit to make up for the carbon it emits. Existing carbon offsetting schemes are under pressure due to the poor quality of some offset projects. 

Moreover, carbon offsets are exploited in developing countries where most projects operate. This puts large companies’ offsetting schemes under scrutiny by environmentalists and investors.

Some groups think that heavy reliance on carbon offsets led to corporate greenwashing. Others believe that it can discourage companies from directly cutting their carbon footprint.

Overall, there’s a consensus in the sector to ensure that corporate offsets don’t replace or delay urgent actions to decarbonize. 

Large firms such as GSK and Volkswagen admitted that they’re aware of the need to prioritize emission reductions over offsetting. Many big corporations also agree like Total, Shell, Barclays, Chevron, Bayer AG, among others. 

If done right, corporate carbon offsetting can rapidly professionalize the voluntary carbon market and further drive its growth. 

The Taskforce for Scaling Voluntary Carbon Markets (TSVCM) survey indicated that market size in 2030 can grow into ~$50 billion at the high end of estimates. That means about 200x growth for the carbon offset market within a decade as the chart shows.

An industry expert once said that companies with their own offsetting projects can manage the impact and quality of their offsets better than buying from carbon credit brokers. 

In-house Carbon Credit Generation

Pharmaceutical: GSK

The London-based pharma thinks that homegrown carbon credits can offset any emissions it can’t get rid of. GSK aims to be carbon neutral by 2030 while planning to use offsets until at least 2045. 

About 50% of its carbon emissions is from the firm’s asthma inhaler products. 

The drug maker plans to directly reduce 80% of its own carbon footprint by the end of the decade. This includes emissions from its supply chain and customers. The remaining 20% will be abated through carbon offsets, specifically by investing in mangroves. 

GSK has been leaning on the carbon capture power of mangroves in the coastal areas of Indonesia. The company is supporting the mangrove project in exchange for the carbon the coastal trees are capturing. 

Mangroves are known to sequester up to 50x more carbon than tropical forest trees. Unfortunately, this natural carbon sink is under threat to disappear. In Asia, Indonesia is one of the countries that is hardly hit and GSK is offering financial help.

The pharma company partners with First Climate, a carbon project developer in its mangrove project in Java seeking to restore mangroves in 2,500+ hectares. In exchange for its funding support, GSK expects to generate up to 140,000 carbon credits every year from the project. 

The company even plans to produce as much as 2 million carbon credits each year for its own offsetting purposes. It has more upcoming projects to get all the credits it requires beyond this decade. 

The company then seeks to opt for carbon removal credits for its 2030 climate goals while preferring it for its 2045 targets. 

Automotive: Volkswagen

The German carmaker, Volkswagen, has an even more ambitious goal than GSK – generate 40 million credits each year by 2030. That’s understandable though because the automaker emits around 30x more carbon than the drug maker. 

That goal makes up about 25% of the amount of offsets that global companies bought and retired last year. Bloomberg reported it to be at 155 million.

Volkswagen AG seeks to reach net zero emissions by 2050. It partnered with a local carbon project developer to develop its own carbon credit generating venture “Volkswagen ClimatePartner GmbH”. 

The goal of the program is to offset emissions from the carmaker’s electric vehicle production supply chains in Europe. It has 8 projects underway which includes forests and savanna protection. The venture’s director said that they expect to generate the first carbon credits by 2025. 

Oil and Gas: TotalEnergies

A representative from the big oil and gas industry, TotalEnergies, can’t agree more with the German automaker. The energy firm’s former executive of nature-based climate solutions said that investing in offset projects now is a good start. It can produce good credits in 5 years time. 

Total SE aims to support nature-based projects with $100 million each year. It is meant to have its own natural carbon sinks that can suck in a total of 5 to 10 million tons of carbon each year starting in 2030. 

The oil giant is investing in projects that protect forests, regenerative agriculture, and wetlands. Also part of its 2050 net zero targets, Total will reduce its petroleum products and increase natural gas and renewable electricity. 

BP Plc has a majority stake in Total and helps ramp up its carbon credit generation efforts. 

Other corporates are also turning their attention and money to carbon credit projects that can offset their huge carbon footprint. Shell, Chevron, Barclays, and Bayer AG are some examples. They are investing millions of dollars in nature-based climate solutions such as reforestation, mangrove restoration, and regenerative agriculture. 

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Carbon Credit Brokers: What They Are and How They Work

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Are you a bit wary of investing in carbon credits and want to enlist help from a broker? Or perhaps you only want to learn what brokers do and what is their role in generating carbon credits. 

Either way, this article will help you know everything you need about carbon brokers. And while most of them can be trusted, it never hurts to do your research first. 

What is a Carbon Credit Broker?

A carbon credit broker is tasked with providing investment access to commodity markets. Apart from carbon credits, this can also include other commodity products such as renewable energy credits and sustainable funds. 

So in a sense, carbon credit brokers function in a similar way to traditional brokerage platforms. They simply facilitate the transactions between the investors and their desired market.

But carbon credits work in a highly fragmented space without centralized exchanges as the case with other long-standing stocks.

On the other hand, even the best carbon credit brokers only offer access to the over-the-counter markets. 

In other words, they work as a middleman between carbon market participants looking to participate in the space – the buyers and sellers.

Buying and selling carbon credits via OTC can be risky, especially for those who don’t have enough experience or expertise in the field. For instance, with the growing demand for carbon credits but a lack of centralized exchange, investors will often have to pay a huge premium to buy carbon credits through OTC markets.

Also, when it comes to prices it depends on market conditions at the time of carbon trading and whether the ball is in the buyers’ or the sellers’ court.

This is where the knowledge and skills of carbon credit brokers would come in to help you. Credible brokers can lead you to the right projects that generate high-quality carbon credits. This is critical to avoid falling victim to carbon credit scammers. You can lose hundreds, if not thousands, of dollars if you’re not guided. 

Not to mention that brokers are also in the know who are the top carbon trading companies to work with that can maximize your investment. 

Whether you’re looking to offset your carbon footprint or simply want to support projects that fight climate change, the broker will guide you to find the best choice. 

How Do Carbon Trading Companies Work?

Carbon trading has been successful in reducing greenhouse gas emissions, which is key to tackling climate change. Still, it is also important to note that there are some uncertainties involved in trading carbon credits. 

But the top carbon credit trading companies know their way around that. Popular names include AirCarbon Exchange, Carbon Trade Exchange, Toucan Protocol, and Xpansiv. 

They are businesses that carry out the buying and selling of carbon credits. They offer credits that can be bought, sold, or traded as part of a carbon offsetting project. 

The buyers can use the credits to offset their footprint.  

The basic idea behind carbon trading is to create a market-based mechanism to encourage companies and individuals to cut down their emissions by making it financially beneficial to do so. 

The first step involved in carbon trading is to do an emissions inventory by calculating how much GHG the entity emits. Once the amount is known, the polluter can now buy carbon credits from a carbon trading company. Each credit represents a reduction of one metric ton of CO2 or its equivalent. 

But before the credits are issued, carbon trading companies usually do verification first. It is to verify and ensure that the carbon credits traded are credible and represent real carbon reductions. 

After verification, carbon trading companies can then trade the credits on their platform where buyers and sellers trade. The price for the credits vary, depending on the market type and the underlying regulations.

The proceeds from selling carbon credits are used for various purposes. Most of the money goes to investing or supporting carbon reduction projects such as reforestation, upgrading energy efficient projects, or funding climate mitigation initiatives. 

With that, carbon trading companies play a crucial role in transitioning to a low-carbon economy through market-based incentives to reduce emissions.

So, where do brokers of carbon credits come in? 

They connect the buyers and sellers of carbon credits…but for a fee. 

How much is the Brokers’ Fee?

That fee they charge is reasonable though. They have gone through a process before they were approved as brokers. 

They have waited some time before they have started selling carbon credits. And even before that, they have to make some decisions as to what type of projects they will pick to offer the buyers. 

They will do all the things for you so that you just have to decide which project to support. After all, that’s how they earn – getting the share from a certain percentage of their share in the sale proceeds. 

Not all carbon credit brokers have the same rate or percentage share. Some may charge for as low as 5% while others do so in the range of 10-20%. The difference varies depending on the broker’s expertise, the specific project, and other things. 

The Brokers’ Role in Creating Carbon Credits

Investments in the carbon credit market had soared as carbon prices increased faster, leading to more carbon reductions and removals. It is the case with the EU and California carbon credits or allowances prices in 2021. Brokers play a key role in this space. 

Brokers aid in getting carbon offset projects off the ground through funding and marketing services. These projects can be costly and often take a long time to process. 

A broker’s job is to address those issues by helping project developers (often the sellers) and buyers alike. As some developers would say that brokers are critical, especially at the times when demand and prices are low.

In other words, a broker’s role is to make the project attractive to a buyer or a reseller.

Some carbon credit brokers are even taking huge risks to develop those projects. For example, they shoulder the upfront prices for the carbon credits. 

A group of brokers said that bulk of the proceeds from selling carbon credits goes back to developing more projects. Other revenue chunks are for paying other costs such as administration, marketing, and project monitoring, reporting and verification (MRV).

How Does Buying and Selling Carbon Credits Work?

The concept of buying and selling carbon credits is anchored at the fact that companies are required to emit only a certain amount of greenhouse gases. 

They have to follow that limit to avoid fines, or they can turn to carbon credits for their unavoidable emissions. This trading happens in the compliance or regulated carbon markets.

Take for instance the case of Tesla. The carmaker specializes in producing electric vehicles and clean energy sources. It only means that Tesla has surplus carbon credits on its books, which gives it big revenue through selling those excess credits to other businesses. 

To be exact, the EV maker made a record $1.78 billion sales from carbon credits in 2022 alone. 

But for smaller companies and individuals, things can get tricky because there’s currently no centralized exchange process that can facilitate buyers and sellers. 

That means for the average retail investor, OTC carbon trading may not be the best option. Instead, they might consider other ways but the most common means is through carbon credit brokers.  

If you are a producer of carbon credits, you can sell them yourself. But prepare to exert a lot of effort and spend more time if you want to. Or save them by enlisting a broker. 

The same goes if you are a buyer. You need to do a lot of research before you can trust the carbon credit trading company or platform. 

Finding the Best Carbon Credit Trading Platform

As discussed earlier, carbon trading companies are essential to reduce planet warming emissions. They facilitate the buying and selling of carbon credits. 

There are many different carbon credit trading platforms available to choose from. Though they have unique features, they share one thing in common: they help drive investments into projects that benefit the environment.

Finding the best trading platform to take part in is no easy feat. The first thing to do is to figure out what kind of projects to invest in or support. 

So, for instance, if you prefer to invest in renewable energy projects, it would be better if you pick a company that trades renewable energy credits. It is one among the over one hundred types of carbon credits in the market.

If you are looking for a way to enter the world of carbon credits without the need to wade through all the web of details yourself, one place to start is the online brokerage. These trading platforms provide access to various types of carbon credit investment vehicles such as ETFs or exchange-traded funds.

Through these platforms, you can also choose between different carbon credit futures contracts, depending on what you prefer and the level of investment risk you can take.

Should you want to learn more about carbon credits, here’s our complete guide about it.

Investing in Carbon Credits through a Broker

Investing in carbon credits is one of the best ways to cut your carbon footprint while contributing to the fight against climate change. 

It’s not surprising, therefore, that many countries are now making policies around carbon credits. The UK, EU, US, as well as China are the major country players. They strongly support the growth of carbon markets.

So by investing in the right carbon credits, you’ll be satisfied that your money goes towards projects that help reduce carbon pollution.

But it is important to understand the market well if you want to invest in carbon credits. For one, it helps to know the different carbon credit trading options currently available. Picking the right one to suit your situation will give you the return you want.

It is also crucial to know how the prices of different types of carbon credits change over time. These changes can affect how much return you’ll make when investing in carbon credits.

Trading carbon credits through a broker is considered to be a more transparent transaction than doing it via auctions. That is because brokers, the credible ones, are doing their job to find the best trading company that offers high-quality carbon credits. 

They do a thorough investigation, research, and evaluation of the carbon projects that generate the credits, which in turn, they offer to the buyers. They also have the knowledge to help you decide which credits are best to invest in. 

You just have to talk to them about your possible options and make your choice. That’s what you’re paying them for – to do all the work you should have done without them. 

In the end, knowing how brokers work within the carbon credit market and what their role is can help you better invest your money in the right climate solutions.

Should you prefer to know exactly how to invest in carbon credits, go over our comprehensive guide here. 

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Tax Incentives and Carbon Credits for Biofuels

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Since the Inflation Reduction Act (IRA) was passed by the U.S. Congress last year, the country has started to look at agriculture, and its carbon sequestration, as a key source of renewable energy to produce biofuel and generate carbon credits. 

Several federal and state programs exist that incentivize farmers to turn their agri wastes into biofuel to power vehicles. But it seems they weren’t enough until the government decided to revive and enact the biggest climate change bill. 

To promote clean and renewable sources of energy, the Act incentivizes projects in the sector with $140 billion tax credits. The financial support came in the form of loans, grants, and other incentives to move away from fossil fuels to lower the nation’s CO2 footprint. 

Turning Farm Products and Wastes to Low-Carbon Energy

Renewable energy project developers are seeing great opportunities in converting their agri crops and wastes to cleaner forms of energy like biofuel.

For one, biofuel producers can be eligible to earn the corresponding renewable energy certificates or carbon credits from it. The amount of credits depends on how much carbon their project reduces or removes. 

And more recently, producers of renewable energy in the U.S. are taking advantage of the IRA incentives, either by installing new technology or planning to construct new plants. 

For instance, the Department of Energy had awarded a biofuel company running an ethanol refinery with tens of millions of dollars as grant. The funding is for building a plant that can produce over 1 million gallons of biofuel yearly from wood chips.

Moreover, a carbon capture firm LanzaJet works with another producer to make aviation fuel from a biodiesel plant. The biofuel will be for planes flying from the two largest airports in Chicago.

The plan of the American government to convert agricultural products into energy is not only for cutting emissions but also to boost economic outcomes. Plus, the carbon sequestration capabilities of farms will further drive more agricultural production.   

The Net-Zero Biofuel Producer

One of the biggest projects that the IRA supports is Gevo, a biofuel producer in Colorado operating a 245 acres of field housing corn crops and a refinery plant called Net-Zero 1. The project, which gets its renewable energy from a wind farm, will emit 80% less CO2 than a conventional plant producing ethanol. 

The facility will produce 65 million gallons of aviation fuel each year from processing 35 million corn bushels.

The processes to produce the biofuel, as well as the carbon captured from the air will offset the emissions from the jets. As such, Gevo’s CEO believes it will be the world’s cleanest ethanol plant releasing the lowest CO2 emissions. 

The company’s goals will be achieved only with the financial support from the government through the IRA. 

Its plant will be eligible for a clean fuel tax credit each gallon ($1.75) once it starts operating in 2025. And an additional $85 for each ton of CO2 it captures and stores underground, plus the carbon credits its biofuel plant is eligible to generate.

The company is also expecting a whopping loan guarantee worth over $600 million covering 70% of the plant’s construction expenses. 

All that amid the criticisms of environmental groups worrying about the pollution from agricultural wastes. They claim that more acres of corn production and more manure from farm animals can produce more nutrient pollution. Nitrogen and phosphorus, in particular, pose the biggest problems affecting the water quality in the country. 

Yet, project developers are motivated to build more plants to convert organic wastes to biofuel. 

Biodigesters and the Incentives to Capture Carbon

Currently, there are more than two thousand biodigesters operating in the U.S. But with the passage of the IRA, that number could go up 5 times to about 15 thousand more. 

These biodigesters, mostly in big cattle and poultry farms, are producing methane to use in producing power and transportation fuel. A company in Missouri, for instance, is constructing 6 large biodigesters with funding support from the Department of Agriculture to make methane from animal wastes.

Here’s a sample of how a biodigester works to produce methane (biogas), according to a paper by Kalaiselvan et al.

Source: Kalaiselvan et al., 2022.

A cattle farmer beneficiary said that this is a new means to marry conservation farming and new energy production that “farmers will adopt as fast as society accepts it”.

Industry experts also say that farms focusing on producing energy from clean and renewable sources can significantly reduce the agriculture industry’s emissions. It is one of the largest GHG emitters in the country, accounting for 10% of total emissions.

Crop growers also have a bigger role to play by keeping carbon locked in the soil.

Apart from the tax incentives from IRA, farmers would also benefit from another source of income that their low-carbon farming or carbon sequestration practices can produce – carbon credits. Each ton of carbon they capture and store creates one carbon credit.

Locking in Carbon Away and Earning from it

Soil carbon credits have been becoming popular in the US voluntary carbon market. But like the case with livestock or poultry carbon reduction initiatives, critics abound in producing this type of carbon credit. 

These credits are from projects that improve soil carbon sequestration or enhance the carbon removal abilities of plants. But since there’s no single global standard available for crediting soil carbon projects, issues on quality are plaguing the market.  

In particular, how exactly the changes in soil carbon stocks are measured, reported and verified remains a challenge. Topsoil carbon methodologies such as Verra and Gold Standard perform quantification through various means:

Direct sampling
Modeling 
Calculations 
A mix of sampling and modeling

To put an end to soil carbon credit quality problems, the Integrity Council for the Voluntary Carbon Market released its long-awaited Core Carbon Principles or CCPs. It sets the global standard defining how high-quality carbon credits look based on climate, environmental and social factors. 

The Council’s chair remarked it is vital for the market’s growth, saying:

“Building a widely shared understanding of what high integrity means for carbon crediting programs and categories of carbon credits is a pre-condition for the development and growth of a viable and vibrant VCM.”

The CCP label will bring credibility and integrity to soil carbon and other types of credits. This will further increase the demand for them, along with their prices. 

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Carbon Credit from Tequila Agave

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The world’s leading tequila brand, Jose Cuervo, partnered with Arma Services and SURECO & Partners to develop a carbon credit certification methodology for Agave plants used in producing tequila. 

Jose Cuervo’s collaboration with sustainability experts and climate financing specialists will significantly impact the tequila industry’s sustainability and green efforts. 

Tequila Industry’s Carbon Footprint

A study on alcohol consumption’s impact on the climate indicates that producing alcoholic beverages emits about 0.73 to 2.38 kg CO2 equivalent per liter (CO2e/L). The findings show these emissions of each alcohol category:

Wine has the biggest climate impact – 2.38 kg CO2e/L
Spirits come second – 2.07 kg CO2e /L
Beer has the lowest emissions – 0.73-0.81 kg CO2e/L

Tequila is a type of liquor that’s even stronger than wine. At 40% alcohol volume, tequila emits about 3 kg CO2e/L, including transportation emissions of 0.5 kg CO2e/L. And since the Tequila industry contributes a lot to carbon emissions, sustainable actions, and collaborations are critical.

Huge carbon footprint reduction efforts are common among all various types of beverages despite the differences in their emissions. But since the source of emissions differs between production processes, each beverage needs tailored fit sustainability solutions. 

It’s also important to note that feedstock, or the raw materials used in producing tequila, has the lowest CO2 footprint. It is the processing and packaging that emits large amounts of CO2, particularly the use of fossil fuels and heavy glass bottles. 

The blue agave plant, also called Mexican agave, is the main ingredient of tequila. 

The partnership between Jose Cuervo and carbon market and sustainability experts seeks to certify agave plantations as carbon sinks. This will then create the corresponding carbon credits for the verified carbon reductions by agaves. 

Agaves’ Carbon Sequestration and Carbon Credits 

Agave is to the drier regions of the world as bamboo is to the wetter parts. Agaves are naturally adapted succulents and deep-rooted trees that are resistant to drought and rising temperatures. 

By planting, pruning, and intercropping agaves, these carbon sinks can suck in and store around 30 to 60 tons of CO2 per hectare (10,000 sq.m.). 

But according to another agave farming expert, agave-based agroforestry, with 2,000 agaves per hectare, can store up to 73.6 tons of carbon over a 10-year period.

Most notably, if cultivated on 2.2 million hectares or 5.4 million acres in Mexico, agaves can sequester 100% of the nation’s annual emissions. 

Add to this the fact that agaves can grow on degraded land like deserts, which are unsuitable for growing crops. They don’t need irrigation or any chemical inputs to survive. 

This carbon sequestration capacity and other attributes of agaves, particularly blue agaves for tequila production, is what Jose Cuervo is looking to certify with carbon credits.  

With 250+ years of experience in producing tequila, Jose Cuervo’s popular tequilas are made from blue agave plants in Mexico. Its Agave Project explores other sustainable uses for the plant. 

The tequila producer is also innovating its production processes to cut down its environmental impact. The move to create a carbon credit certification methodology for agave plantations is another part of its innovation. 

Its collaboration with Arma Services advances the industry’s transition towards carbon markets while promoting sustainable practices to fight climate change. 

Arma Services focuses on developing carbon offset projects that are effective and highly valuable. The company’s expertise lies in the forestry, agriculture, and technology sectors. It is its proprietary AI software to ensure that the carbon credits they create are of the highest quality.

Joining the innovative collaboration is sustainability and carbon market expert SURECO & Partners. According to its CEO, Jessica Jacob:

“This alliance marks a pivotal moment in the tequila industry’s journey towards greater sustainability. By creating a carbon credit certification methodology for agave, we can encourage the adoption of sustainable practices and actively participate in the fight against climate change.”

She also added that the partnership will expand its efforts in reducing global carbon emissions. 

Together with trusted advisors of climate financing, RBA Banca de Inversión and RBA Sostenibilidad, the collaboration will not only establish a carbon credit methodology for tequila’s agave. It will also develop studies and projects, as well as create financing for those who will benefit in the voluntary carbon market.

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