Uranium Prices Take a Dip at $89 Per Pound

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Uranium prices have experienced a decline to $89 per pound, marking the 6th consecutive week of decreases since reaching a 16-year high of $106 in early February. This drop comes as market participants continue to evaluate the evolving dynamics following the recent surge in prices. 

RELEVANT: Uranium Prices at 16-Year Highs, Breaking $100 Per Pound

Uranium’s Rollercoaster: From Heights to Pullbacks

Uranium, a dense metal found in most rocks, primarily serves as fuel in nuclear power plants. The standard contract unit for uranium is 250 pounds of U3O8 and is traded on the New York Mercantile Exchange. Key uranium-producing countries include Kazakhstan, Canada, and Australia.

Following a strong bullish trend that propelled uranium prices to levels unseen since the Fukushima disaster in 2011, the metal has encountered a 22% pullback over the past six weeks. 

Chart from Numerco

The elevated U3O8 prices have led utilities to abstain from spot market purchases, instead relying on previously established long-term contracts. Moreover, speculative physical uranium holders have capitalized on the recent rally to secure profits. 

Additionally, the anticipation of a sustained increase in demand, signaled by major economies, has prompted mines to resume uranium projects in US mountain states, further contributing to the moderation of prices.

Despite the decrease in futures trading prices to $88.50 per pound in New York, current prices still surpass last year’s average. This resilience in the market reflects ongoing bullish sentiment towards uranium. 

Source: Trading Economics

The uranium prices reported by Trading Economics are based on over-the-counter (OTC) and contract-for-difference (CFD) financial instruments. 

Despite this correction, analysts and experts remain optimistic about the long-term prospects of nuclear fuel. Industry insiders suggest that the market has likely established a new baseline, supported by robust demand forecasts and supply constraints.

Jonathan Hinze, president of the nuclear industry research firm UxC, expressed confidence in uranium’s fundamentals, stating, “We have reached a bottom”. 

He emphasized the enduring demand for uranium and noted that supply has yet to catch up with this demand.

Recent global annual production of uranium has ranged from 55,000 – 65,000 tons of uranium metal, roughly matching fuel demand, according to the International Atomic Energy Agency. As per the Nuclear Energy Agency, an estimated 60,000 tons of uranium are required annually to fuel the world’s 436 operating nuclear reactors.

Uranium Market Resilience and Geopolitical Complexities

In recent developments, Kazatomprom, the world’s leading uranium producer responsible for 40% of U3O8 supply, refrained from announcing further production downgrades in its latest earnings report. However, the company continues to caution about limited sulphuric acid supplies, which could pose additional challenges in meeting its guidance.

Projections from major producers like Cameco indicate impending supply deficits in the uranium market. The International Energy Agency forecasts a demand of 200 million pounds by 2040, while Kazatomprom predicts a global shortfall of 21 million pounds by 2030, rising to 147 million pounds by 2040.

According to the World Nuclear Associations data as shown in the chart below, demand would continuously increase by 2040 while supply would be limited. This leaves a huge gap between the metal’s supply and demand requirements worldwide by that period.

Chart from IRIS France website

Geopolitical factors add complexity to the supply outlook. For instance, the U.S. is considering a bill to ban imports of enriched Russian uranium, which is currently under review in the Senate.

Given the increasingly uncertain future of nuclear fuel, countries worldwide are moving to secure their power generation supply. 

Sweden’s Climate Minister Romina Pourmokhtari has announced plans to lift the uranium mining ban as early as May. This is a good development for the EU market, as Sweden holds 80% of the EU’s uranium deposits.

Meanwhile, the Australian Chamber of Commerce and Industry (CCI) has urged the state government to reconsider the uranium ban. According to The West Australian, the CCI’s analysis suggests that uranium mining could generate over $650 million in exports and create 9,000 jobs.

Despite holding around one-third of global uranium resources, BHP’s Olympic Dam remains Australia’s sole active nuclear fuel producer.

As uranium prices experience a notable decline, the market witnesses a shift from recent highs, prompting a reassessment of supply-demand dynamics and geopolitical factors. Despite the pullback, optimism persists in the industry, fueled by projections of impending supply deficits and increasing global interest in nuclear power as a climate change solution. 

READ MORE: No Net Zero Without Uranium: Here’s Why

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Lithium Prices and The Insights into the EV Market’s Pulse

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As the electric vehicle (EV) market evolves, understanding the dynamics of lithium becomes important. With shifting consumer preferences, changing regulations, and fluctuating prices, this article highlights the trends and targets significantly impacting the industry. 

The EV Landscape: PHEVs, BEVs, and Regulatory Adjustments

Plug-in electric vehicles (PEVs) are vehicles that use rechargeable batteries as their primary source of power and can be charged by plugging into an electrical outlet or charging station. PEVs offer reduced emissions compared to traditional internal combustion engine (ICE) vehicles and can contribute to lowering dependence on fossil fuels.

PEVs include both plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs), as both types are rechargeable using external electricity sources. 

In response to slowing income growth, reduced government subsidies, and ongoing concerns about limited charging infrastructure in certain regions, consumers and automakers are increasingly turning to PHEVs as a more affordable interim solution on the path toward full electrification.

RELATED: New Monthly EV Sales Record to Kickstart 2024

In China, the share of BEVs within the PEV market decreased by 10% points to 57.0% in February compared to the same period last year. This declining trend is also evident in the United States and Germany, according to S&P Global Commodity Insights report. 

Both the United States and the European Union (EU) are adjusting their PEV targets in response to industry feedback.

Chart from S&P Global Commodity Insights

The Biden administration’s final tailpipe rule, which sets ambitious targets for BEV penetration, has been revised lower compared to the initial proposal. The finalized rule places greater emphasis on the role of PHEVs, aiming for BEVs to represent 56% of new car sales by 2032. PHEVs account for a 13% share, resulting in a total PEV share of 69%.

Similarly, the EU is undergoing the legislative process to enact its Euro 7 vehicle emissions rule. Following resistance from automakers and member states, the EU has adjusted its approach to BEV adoption in the short term. Still, the bloc continues to push for its long-term goal of phasing out new ICE vehicles by 2035.

Since 2014 until 2023, BEVs got the most sales globally as per EV Volumes tracking report, as illustrated below.

As subsidies for PEVs diminish, the momentum of PEV sales will depend on factors such as consumer income, vehicle pricing, model selection, performance, and regulatory pressures on emissions reduction from manufacturers. 

Looser emissions standards may slow the adoption of BEVs in favor of PHEVs, which utilize smaller batteries and fewer metals.

Lithium: Gearing Up the World of EVs 

What powers each of these electric vehicles is a critical mineral they call the “white gold” or lithium. It’s one of the key materials used to make batteries for EVs. 

RELATED: Lithium: The White Gold Powering up the EV Revolution

Per S&P Global report, lithium prices experienced a slight increase in March. This is driven by various factors including production cuts, auction results, and improved sentiment regarding demand for traction batteries.  

Prices rose by 5.1% and 2.1%, respectively, for lithium carbonate CIF Asia and delivered duty-paid basis, during the month up to March 22.

Some lithium producers have resumed auctions to ascertain a perceived “true” price for their products. While the spodumene price has been climbing since February, it remains deep in the cost curve despite numerous production cuts. 

The lithium carbonate CIF Asia price ranged between $13,500/ton and $15,000/ton up to March 21. That’s more than double the range observed from April to December 2020, which was between $6,300/ton and $7,250/ton, as shown above. 

Many lithium producers have highlighted in their fourth-quarter 2023 earnings calls the challenge of accurately forecasting the price they will receive for their lithium products. The world’s largest lithium producer, Albemarle, shifted its investment strategy in response to evolving market conditions. 

READ MORE: Albemarle Shifts Focus in Lithium Strategy Amid Market Softening

Notably, lithium auction price suggests that lithium prices are expected to rise by the end of the year. Albemarle is planning a series of upcoming auctions, starting with 10,000 metric tons of spodumene. 

Lithium prices have stabilized since the beginning of 2024 and are now higher than the bottom of the previous cycle. This reflects the current higher cost structure. 

What Lies Ahead for Lithium?

Lithium prices have fallen to levels not seen in over 2 years. While supply cuts suggest an upward trajectory for prices, the extent of the price recovery has been relatively modest thus far, particularly for lithium, despite recent production cuts. 

RELATED: Lithium Producers Adapt to Price Plummet, Cut Costs and Delay Investments

Prices in April may receive further support if stronger March sales and traction battery production data confirm optimistic demand trends.

Investors continue to show interest in lithium projects, despite short-term challenges, recognizing the long-term potential they offer. 

On average, it takes almost 17 years for lithium projects to progress from discovery to commissioning, based on recent updates on mine lead times. This underscores the long-term perspective required for investors in the lithium sector, despite short-term fluctuations in prices and demand.

At the back of all these, the current low-price environment allows for a focus on efficiency and the elimination of high-cost production. Positioning the market for an eventual increase in demand and prices.

Navigating the electric vehicle landscape requires a complete understanding of trends, targets, and lithium prices. As the industry evolves, stakeholders must remain agile, leveraging insights to drive sustainable growth and innovation in the transition to electrification.

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Chile Unveils Latest Business Model to Double Lithium Production

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Chile is the world’s second largest lithium producer accounting for nearly one quarter of global lithium production. As per the latest reports, the country is leveraging a multi-faced approach to maximize its lithium production capacity and ensure sustainable growth catering to the dynamic market demands.

Chile’s business plan has been confirmed by Finance Minister Mario Marcel who said,

“Chile will use three different business models to expand its lithium production that it estimates could increase by 70pc by 2030 and 100pc over the next decade”

Moving on, let’s explore and understand the newly launched business model.

Unravelling Chile’s 3-Way Business Model to Ramp Up Lithium Production 

According to US Geological Survey data, Chile’s estimated lithium output was 234,000 T of lithium carbonate equivalent (LCE) in the last year. The government plans to ramp up lithium supply to 70% by 2030 with 100% projected growth.

Here’s a breakdown of the 3-way business model:

1. Public-Private Alliances in Strategic Salt Lakes

Chile will establish public-private alliances in two salt lakes deemed strategic: Atacama in the Antofagasta region and Maricunga in the Atacama region. In these alliances, the state will hold a majority share.

2. Promotion of Public-Private Alliances in Other Salt Lakes

Five additional salt lakes, including Alto Andino and Pedernales, will also see public-private alliances. The state will seek the “best agreement” with private partners, either as a majority or minority participant.

3. Private Sector Leadership in 26 Salt Lakes

In 26 other salt lakes, the private sector will take the lead in development. While associations with state companies are possible, they won’t be mandatory.

Consequently, private investors will express interest in these salt lakes through Requests for Information (RFI) in April 2024 and the results will be announced in July.

The selected application will acquire special lithium operating contracts (CEOL). Notably, around 38 salt lakes will be designated as protected areas, adhering to Chile’s commitments under the Convention of Biological Diversity.

Nicolas Grau economy minister, Chile has further commented,

“During this government, we will sign a group of CEOLs in which the private sector will lead production in which the state will not be a major partner,” 

Picture: The Lithium Triangle comprising Chile, Argentina, and Bolivia

source: US Geological Survey

Chile acknowledges the significance of empowering local businesses and communities to engage in the lithium value chain actively. Small and medium-sized enterprises (SMEs) are encouraged to participate in exploration, extraction, and value-added processes, promoting economic diversification and regional growth.

Moreover, programs focused on skills enhancement, technology transfer, and entrepreneurship empower local stakeholders to seize opportunities in the expanding lithium market.

Chile’s Bold Move to Nationalize its Domestic Lithium Industry 

Chile’s President Gabriel Boric had announced a bold move: the nationalization of Chile’s lithium industry in the last year. The newly launched business model thus fortifies his aim to take control of its massive lithium industry.

President Boric further believes that the nationalization of Chile’s domestic lithium industry is the best way to progress to a developed economy that affirms prosperity, social equity, and sustainability.

Graph: Major countries in worldwide lithium mine production in 2023

source: statistica

SQM and Albemarle to come under state ownership?

Chilean SQM (Sociedad Química y Minera) and US-based Albemarle, the sole producers in the country, conduct their operations in the Salar de Atacama under leases granted by Chile’s state development agency, Corfo. Both these industry giants drive Chile’s economic growth and hold its position as a key global lithium supplier.

With this nationalization move, separate state-owned companies will take control of Chile’s lithium operations from SQMandAlbemarle, without terminating their current contracts. As per reports, SQM’s contract will expire in 2030, while Albemarle’s contract extends until 2043.

Read More: Why Lithium Prices are Plunging and What to Expect • Carbon Credits

Impact on EV manufacturers…

It’s speculative that this economic shift in Chile’s lithium production would be a challenge for EV manufacturers like Tesla Inc. and LG Energy Solution Ltd. This is because they are reliant on SQM and Albemarle for their lithium supplies.

On the other hand, some industry experts hail President Gabriel Boric’s 3-pointer business plan to exploit the new lithium reserves in Chile. They consider this project would automatically increase the demand for lithium from EV manufacturers across the world.

If the predictions come true, Chile will certainly receive tons of applause from the global EV industry. Hence, doubling its domestic lithium production would not be a tough job.

However, we understand from reports that this strategy does not 100% nationalize lithium production in Chile. Rather it highlights a shift towards stronger public-private partnerships, with the state holding a majority stake in forthcoming lithium projects.

Nevertheless, Chile’s action to double its lithium production is vital for careful resource management of this critical mineral and promises a sustainable future.

Must Read: Top Lithium Stocks Making Waves in 2024 • Carbon Credits

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US DOE to Shell Out $6B to Decarbonize Heavy Industries

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In the bid to decarbonize energy-intensive industries, particularly steel and aluminum, the US Department of Energy (DOE) revealed a substantial funding allocation of up to $6 billion for 33 projects. The chosen initiatives aim to decarbonize energy-intensive industries, cut industrial greenhouse gas (GHG) emissions, bolster union jobs, revitalize industrial communities, and enhance the nation’s manufacturing competitiveness. 

Powering Progress: DOE’s Decarbonization Push

The funding is supported by President Biden’s Bipartisan Infrastructure Law ($489 million) and Inflation Reduction Act ($5.47 billion). It will help scale up emerging industrial decarbonization technologies crucial for the current administration’s climate and domestic manufacturing objectives. 

RELATED: US Saw $213B Investment in Clean Technologies, Paving the Way for Net Zero

Collectively, the projects could mitigate over 14 million metric tons of carbon dioxide (CO2) emissions annually. That’s equal to the yearly emissions of 3 million gasoline-powered cars. 

The industrial sector accounts for nearly ⅓ of the nation’s overall GHG emissions. Thus, the transformative federal investment will be matched by the selected projects to leverage over $20 billion in total funding. 

The projects could potentially reduce carbon emissions by an average of 77%. Managed by DOE’s Office of Clean Energy Demonstrations (OCED), the projects unveiled today under the Industrial Demonstrations Program aim to fortify America’s manufacturing and industrial competitiveness. 

The chosen projects for award negotiations include a range of difficult-to-decarbonize industries, with representation from various sectors, including the following breakdown:

7 projects in chemicals and refining,
6 projects in cement and concrete,
6 projects in iron and steel,
5 projects in aluminum and metals,
3 projects in food and beverage,
3 projects in glass,
2 projects focused on process heat, and
1 project in pulp and paper.

Forging a Green Steel Sector

The decarbonization funding announced by the US DOE has the potential to catalyze a transformative shift towards “green” steel production in the United States, according to industry leaders and observers.

The US steel sector has made significant strides in producing recycled steel through electric arc furnace (EAF) mills. It accounts for over 70% of the country’s steel output. However, there’s growing recognition of the need to embrace cleaner primary steel production methods. 

Last year, steel giant ArcelorMittal and Microsoft backed MIT spinout company Boston Metal to make clean steel. The startup employs a unique electrolysis process to manufacture green steel and help decarbonize the industry. 

READ MORE: ArcelorMittal and Microsoft Back MIT Green Steel Firm With $120M

Globally, there’s a rapid expansion of EAF production as steelmakers respond to increasing demand for cleaner materials and efforts to mitigate GHG emissions. In this context, countries, especially in Europe, are investing in technologies aimed at reducing emissions in primary steelmaking.

A nonprofit organization focused on decarbonizing steel and other industries highlighted the significance of investing in green ironmaking technologies. These technologies involve transitioning away from coal-based furnaces traditionally used in iron ore processing, thereby lowering emissions and enhancing competitiveness.

Below is a sample process flow in producing green pig iron. It’s from a Nevada-based green pig iron company Magnum.

A sample process flow in producing green pig iron. It’s from a Nevada-based green pig iron company Magnum.

There’s a huge potential for substantial emissions reductions both domestically and globally through the adoption of these technologies. By showing the feasibility of green ironmaking technologies in the US, there is an opportunity to deploy them worldwide, leading to reduced emissions on a global scale.

Ironclad Solutions: Decarbonization Projects in Focus

In the iron and steel sector, 6 projects have been earmarked for potential investment totaling $1.5 billion. They have the potential to prevent around 2.5 million metric tons of CO2 emissions annually. 

One notable project involves Sweden’s SSAB AB, which is in negotiations for up to $500 million to establish the world’s first commercial-scale facility utilizing HYBRIT technology in Mississippi. This innovative technology uses green hydrogen to power ironmaking processes, offering significant emissions reductions.

Cleveland-Cliffs is also in discussions for up to $500 million to transition its Middletown Works facility in Ohio from a coal-based blast furnace to a hydrogen-ready direct reduced iron furnace, accompanied by the installation of electric mantling furnaces.

Furthermore, Vale USA has been selected for potential funding of up to $282.9 million to establish a pioneering production facility for low-emission iron ore briquettes on the US Gulf Coast, providing a sustainable alternative to traditional iron ore pellets.

RELATED: Decarbonizing the Steel Industry Through Green Pig Iron

In the aluminum and nonferrous metals sector, 5 projects are eligible for over $900 million in federal investment. They are aimed at reducing around 4 million metric tons of CO2 annually.

Funding the Future

The potential financial support from DOE’s decarbonization funding serves to mitigate some of the risks associated with the significant investment required for steelmakers to decarbonize. Hilary Lewis, steel director with Industrious Labs noted in an interview the importance of this federal support, saying that:

“The role of government is significant here and it is significant in Europe as well, and it needs to be a partnership with industry that will put forward innovative, ambitious projects that will actually get us to near-zero [emissions].”

The DOE emphasized that the selection for award negotiations doesn’t guarantee the issuance or the provision of its decarbonization funding. The duration of the negotiation phase and the timeline for final decarbonization funding decisions weren’t yet specified.

Here’s the DOE’s IDP website to find the details about each of the chosen projects.

The DOE funding presents a critical opportunity to accelerate the transition towards green steel production in the US. It can position the country as a leader in sustainable steelmaking practices and contribute to broader efforts to combat climate change and reduce environmental impact.

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Nestlé Unveils New Initiatives to Cut Cocoa Supply Emissions

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Moving towards sustainable sourcing, Nestlé has recently announced groundbreaking initiatives aimed at curbing cocoa supply emissions. Already a global leader in food and beverage, its commitment to the environment has grabbed a significant spotlight. 

Nestlé has unveiled its transformative projects spanning five years in collaboration with suppliers Cargill and Export Trading Group’s (ETG) Beyond Beans. These initiatives involve advancements in agroforestry practices and a shift towards sustainable farming of cocoa.

Let’s deep dive into the details of Nestlé’s ambitious efforts to revolutionize the cocoa industry towards emission reductions.

Fostering Partnership with Cargill and ETG | Beyond Beans for Sustainable Projects

Nestlé’s partnership with its suppliers Cargill and ETG | Beyond Beans aligns with its objective to achieve net zero by 2050. They will primarily target carbon reduction and removal with Nestle’s cocoa supply chain. 

The key objectives of the projects are:  

Cocoa & Forest Initiative (CFI)

It envisions planting over 2 million shade trees, managed by 20,000 farmers in Ghana and Côte d’Ivoire. These projects are projected to cut down over 500,000 MTs of carbon dioxide over twenty years. 

The shade trees mitigate exposure to sunlight and preserve moisture for the cocoa crops in dry seasons. They optimize water resources and boost biodiversity on farms. Most importantly, they are highly efficient in absorbing CO2 from the atmosphere. 

Under CFI, Nestlé also plans to cut cocoa supply emissions by encouraging farmers to shift towards regenerative agriculture. The core focus would be to support reforestation in degraded cocoa farming lands. 

To support this program, Darrell High, global cocoa manager at Nestlé has said: 

“We’re working to address our emissions all the way to the farms we source from. Long-lasting forest protection can only happen when collaborating with fully committed suppliers, just like Cargill and ETG | Beyond Beans. We also depend on the participation of local communities, who have an impact on the forests and can help find land-use solutions that are best suited for the local reality.”

Read More: Carbon Credits Farming (Everything You Need To Know)

Involving Locals and Community Engagement Activities

Community engagement and social inclusions of the locals come under Nestlé’s Income Accelerator Program. It’s specifically designed to support cocoa-farming families. The projects would ensure that farmers receive their due rewards and incentives for the labor they put into planting and nurturing the cocoa crops.

Ursule Gatta, Cargill’s sustainability partnership officer in Côte d’IvoireOur said,

 “Our ambition is to scale up the project to cover 18 cooperatives over five years, aligned with the Nestlé Income Accelerator program.”

Cargill and ETG | Beyond Bean projects strive to engage the local communities whose agricultural lands have not been cultivated for a long time. These two firms will take over those lands for reforestation and redevelopment purposes. 

They aim to plant tree nurseries for cocoa seed cultivation. Apart from financial aid, the companies will offer technical assistance and consultations to the farmers to carry out sustainable agricultural practices. 

Both the supplier chains play crucial roles in facilitating the implementation of Nestlé’s Income Accelerator Program within these projects. 

Unlocking Global Reforestation Program (GRP) to Mitigate Cocoa Emissions by 2030

As mentioned on Nestlé’s official website, it has set an ambitious reforestation goal aka the Global Reforestation Program (GRP). The company pledges to grow 200 million trees by 2030 in and around farms where it sources its key ingredients. 

Nestle’s primary focus will be on deforested land. They will also work to establish conservation and restoration as standard practices across their supply chains. 

Why Nestlé’s GRP is crucial for climate change? Well, reforestation and restoration of degraded landscapes actively aid in long-term carbon removal and storage. These efforts are part of Natural Climate Solutions (NCS), essential for combating climate change.

Therefore, Nestlé with its land-use footprint must urgently invest in conservation and restoration to reach the 1.5°C target set by the International Panel on Climate Change (IPCC) in the COP21 Paris agreement.

The company’s Net Zero Roadmap incorporates carbon removals, primarily from sourcing ingredients. They believe that natural climate remedies in their supply chain can potentially eliminate GHGs from the atmosphere. This is expected to further boost their decarbonization goal of achieving 2.0 million tCO2e removals by 2030.

The chart examines Nestlé’s sustainability performance in 2021

source: www.nestle.com/sustainability

The main points highlighted in this chart are:

By 2025, reduce absolute emissions by 20%
from 2018 levels

By 2030, reduce absolute emissions by 50% from 2018 levels

Simultaneously, it is also important to track the viability of the projects to enjoy long-term benefits. One such way is monitoring the number of trees planted and the volume of CO2 removed. 

As per reports, Nestlé anticipates installing high-resolution satellite imaging technology to ensure the smooth running of its cocoa supply emission control strategy. With this tool, they can track the sustainability of the cultivated trees and evaluate the overall outcome of the reforestation projects. 

One can foresee that Nestlé aims to revolutionize the cocoa industry’s approach to mitigating emissions with innovative strategies and partnerships. They are investing at the landscape level to achieve both environmental and socio-economic benefits.

Further Reading: Nestlé and Fonterra to Develop NZ’s First Net Zero Dairy Farm (carboncredits.com)

 

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The Swiss-Thai Carbon Credit Deal Ignites EV Revolution in Bangkok

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Switzerland and Thailand recently cracked a groundbreaking carbon credit deal under Article 6.2 of the Paris Agreement on 9 January 2024.

Both countries have made their first transaction of Internationally Transferred Mitigation Outcomes (ITMOs), in which Swiss-based KliK Foundation purchased 1916 ITMOs from Thailand’s Energy Absolute Public Co. Ltd company for the Bangkok E-Bus Program.

Switzerland is the first sovereign country to purchase units to meet its national determined contributions (NDCs). On June 24, 2022, the endorsement of this deal occurred, and credits were allocated to the KliK Foundation in the Swiss Emissions Trading Registry on December 15, 2023

For a few years, the KliK Foundation has been supporting CO2 mitigation activities in countries that have signed a bilateral climate agreement with Switzerland under Article 6.2 of the Paris Agreement.

Apart from Thailand, the Swizz country has also signed similar agreements with Dominica, Ukraine, Ghana, Chile, Georgia, Morocco, Malawi, Peru, Senegal, Tunisia, Uruguay, and Vanuatu.

Read More: Thai-Swiss Deal Sets Paris Agreement Carbon Offsets in Action (carboncredits.com)

Relevance of Article 6.2 of the Paris Agreement to the Swiss-Thai Carbon Credit Deal  

Article 6.2 of the Paris Agreement provides “a decentralized framework for countries that are parties to the Paris Agreement to enter into bilateral or multilateral arrangements, known as “cooperative approaches.” 

It enables the transfer of one country’s GHG carbon credits to other countries to fulfill their net zero pledge to the Paris Agreement, as outlined in their NDCs. These specific carbon credits are known as Internationally Transferred Mitigation Outcomes (ITMOs).

The country obtaining ITMOs under Article 6.2 is termed the “host country,” as it hosts several types of GHG reduction projects. The “recipient” country is involved in ITMO transactions. It fortifies its NDCs by financing projects located at sustainable and cost-effective GHG mitigation sites.

This is how Article 6.2 of the Paris Agreement facilitates the utilization of cross-border carbon credit exchange to achieve their net zero targets under the Paris Agreement.

Both the companies have given a joint statement:

“The ITMOs will be used by the Klik Foundation to fulfill its compensation obligation under the Swiss CO₂ Act. Switzerland intends to use these ITMOs towards its target under the Paris Agreement. To avoid double counting, Thailand has committed to adjust its greenhouse gas inventory by the amount of mitigation outcomes transferred to Switzerland.”

This leads to an inference that the Swiss-Thai carbon credit deal is a mutual commitment towards their NDCs and immensely significant for the global carbon credit market.

Let’s read about the program included in the deal…

Bangkok E-Bus Program Ignites EV Revolution

The Bangkok E-Bus Programme is the crown jewel of this deal. Financed by the KliK Foundation, it has authorized a climate protection plan for the private-public transport sector to introduce EVs on the road.

Marco Berg, the managing director of KliK Foundation has confirmed that the organization commits to purchasing offsets for a maximum of 1.5 million metric tons of CO2 emissions from Energy Absolute until 2030. This acquisition constitutes only a fraction of the 20 million credits it anticipates acquiring by the end of the decade.

Energy Absolute Public Company Limited overseeing the manufacturing of EVs has contracted South Pole to develop the Bangkok E-Bus Programme. Initially, it would target all oil-operated vehicles in the Bangkok Metropolitan area and replace them with EVs.

As per reports, Energy Absolute will generate carbon credits with the launch of about 4000 electric buses in Bangkok. It will eventually stop petrol and diesel use. With this action plan, the government aims to curb a huge amount of greenhouse gas load and air pollution in the city.

Simultaneously, it will establish the groundwork for a comprehensive charging infrastructure network throughout the city. This climate protection initiative is anticipated to play a crucial role in enhancing air quality in Bangkok. This makes the program a pioneer in driving the electrification of Thailand’s mobility sector.

Furthermore, Chatrapon Sripratum, VP of Strategy Development & Investment Planning of Energy Absolute PCL strongly believes that the deal would be successful. He expects a huge bloom in the coming years.

Promising Sustainable Electrical Mobility in Bangkok

With concrete efforts and robust financing to ramp up EV manufacturing, Bangkok is setting its sights on a decarbonized future. The Bangkok E-Bus is a pilot program based on a highly efficient and sustainable strategy.

Some of the key features of this massive project highlighted by the Klik Foundation are:

The current total ownership costs (TCO) for electric buses are notably higher than those for internal combustion engine (ICE) buses. Further, The KliK Foundation intends to use carbon finance obtained through the acquisition of at least 500,000 ITMOs until 2030. The goal is to compensate the cost of total ownership between conventional buses and electric buses included in this project.

Between 2021 and 2022, the team conducted a test run, putting only 120 EVs on the road. However, privately operated bus lines in the Bangkok Metropolitan Region are currently introducing electric buses in phases. It aims to replace all internal combustion engine (ICE) buses from private operators and mitigate fossil fuel combustion.

The KliK financing mitigation initiative will offer valuable perspectives on digitalized MRV systems for GHG reduction activities and establishing EV-friendly infrastructure in Bangkok. This, in turn, will enhance Thailand’s NDC mitigation ambitions.

Value of electric vehicles (EVs) market in Thailand from 2016 to 2022, with forecasts through 2025 (in million U.S. dollars)

Source: Statista

The Bangkok E-Bus program will offer cheaper tickets, the best quality travel experience, increased frequency, and convenient travel routes for general citizens. It would give a huge boost to Bangkok’s economy and Thailand’s climate mitigation goals.

We believe that the success of this Swiss-Thai carbon credit deal should foster confidence and trust in similar agreements. It could be setting a great example for ethical carbon trading in the future.

More insights: Thailand’s Biggest Companies Plan Carbon Credit Exchange • Carbon Credits

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Iberdrola Announces $45 Billion Investment Plan in US Power Grids

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Spain’s leading power company Iberdrola has announced a staggering $45 billion investment in US power grids, bolstering energy infrastructure in the country for the next three years. Iberdrola’s main aim is to upgrade and expand US power grids.

The decision is a huge shift towards global energy investments. It signifies the company’s expansion efforts and commitment to renewable energy projects across the Atlantic.

Iberdrola’s Ambitious Investment Strategy for US Power Grids

The new investment plan is an extension of what Iberdrola had announced in 2022. The company said it would adopt a more meticulous approach to the renewable energy sector.

The company aims to divulge 15.5 billion euros to projects already under construction or about to begin construction. Consequently, it would expand its portfolio by ~ 9,000 MW. It would be a huge stride to achieve the target of 52 GW of renewable infrastructural capacity by the end of 2025.

Iberdrola has a market cap of approximately $77 billion, making it the largest European electricity company. It will render 34% of global net investments to the US and 24% to the UK by 2026. Most of the funds will be used in offshore wind projects in the United States, United Kingdom, France, and Germany.

First Achievement: Launching Vineyard Wind 1 Project

Avangrid, Inc. a leading sustainable energy company and member of the Iberdrola Group, along with Copenhagen Infrastructure Partners (CIP), a global leader in green energy investment, has successfully installed the first GE Haliade-X Wind Turbine Generator (WTG) for the Vineyard Wind 1 project. This will be the first large-scale offshore wind farm in the United States with 13 MW capacity.

Avangrid CEO Pedro Azagra, supporting this move has said,

“This is a monumental achievement and a proud day for offshore wind in the United States that proves this industry is real and demonstrates Avangrid’s steadfast commitment to helping the Northeast region meet its clean energy and climate goals.”

This is Iberdrola’s first achievement on the commencement of a $45 billion investment plan in US power grids. As reported in a press release from Vineyard Wind, the key features of the completed GE Haliade-X Wind Turbine Generator will be:

It will contain 62 wind turbines of 806 MW capacity.
It can power more than 400,000 homes and companies in Massachusetts.
It is expected to reduce 1.6 MMT carbon emissions per year which is equivalent to offloading 325,000 cars from roads.
Read more: Iberdrola Launches New Carbon Credit Unit to Sequester 61M Tons of CO2 (carboncredits.com)

Advancements in Grid Infrastructure Through Substantial Investments

Iberdrola’s commitment to net zero transcends Vineyard Wind, with significant investments directed toward grid infrastructure and the introduction of renewable energies. Ignacio Sanchez Galan, CEO of Iberdrola has confirmed that,

“The investments made in grids have also resulted in a new asset record: EUR 42,000 million spent on 1,300,000 km of lines and thousands of substations in the United States, the United Kingdom, Brazil and Spain.”

The image demonstrates Iberdrola’s global presence sustainability report in 2023:

source: Iberdrola

Additionally, Iberdrola’s annual report elaborates on its significant achievements in the last year. They are:

Investments in 2023 propelled company assets beyond EUR 150,000 million, resulting in a net profit of EUR 4,803 million. This marked an 11% increase from the prior year.
The company achieved growth while fortifying its financial stability. It secured over EUR 13,300 million in green and sustainable financing, reaffirming its leadership in the energy sector.

Smart Microgrids: Empowering Small Communities with Sustainable Energy Solutions

Another interesting attribute of Iberdrola’s investment strategy is installing smart microgrids in specific areas outside the proximity of the main grid. In a solar-powered microgrid system, the panels harness electricity from sunlight during the day and simultaneously store excess energy in batteries for use during periods of low light. The battery storage integrated into microgrids ensures uninterrupted power supply during outages or maintenance, forming what is referred to as “electricity islands”.

It’s a sustainable and energy-efficient energy solution to fulfill the renewable energy demands of small, remote communities that have no access to the conventional electricity grid.

Here’s an infographic demonstrating smart microgrid technology:

Source: Iberdrola

Decoding Iberdrola’s Decision to Invest in Grid Expansion and Renewable Energy 

Why Iberdrola has majorly directed a huge investment to precisely expand grids and renewable sources? The reason the company strongly believes that investing in grids will bolster the electrification drive, pivotal for decarbonization efforts.

They also envision that the electrical sector is poised for exponential growth in the future. Therefore, upgrading the grid infrastructure is crucial for ensuring a more reliable, stable, and secure energy supply.

With a robust and integrated grid network, Iberdrola aims to diminish dependence on fossil fuels as they are highly volatile and leave behind a huge carbon footprint. Thus, the decision to invest in grids aligns with global climate goals.

Study the image below to understand Iberdrola’s Climate Action Plan:

source: Iberdrola

Noteworthy, The International Energy Agency (IEA) states that the world needs to add or replace approximately 80 million km of power lines by 2040 to meet the Paris Agreement’s goal of restricting temperature rise to 1.5°C.

After evaluating all these crucial factors, one can infer that Iberdrola’s $45 billion investment plan in US power grids is certainly going to be a game changer in the renewable energy sector.

Further Reading: Tesla’s $413M Power Move: Megapacks to Revolutionize Massachusetts’ Energy Grid (carboncredits.com)

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World Bank Pays Vietnam Over $51 Million in Carbon Credits

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Vietnam has achieved a significant milestone in its efforts to combat climate change, receiving a payment of over $51 million for verified emissions reductions, also known as carbon credits.

The payment is from the World Bank’s Forest Carbon Partnership Facility (FCPF). It is attributed to Vietnam’s successful initiatives in reducing deforestation and forest degradation (REDD) and enhancing carbon storage through reforestation and afforestation.

Rewarding Climate Action via Carbon Credits

Notably, Vietnam is the first country in the East Asia Pacific region to receive a results-based payment (RBP) from the FCPF. 

Results-based payment is a dynamic strategy within the space of sustainable development. It is designed to incentivize climate action, foster the growth of carbon markets, and spur innovation. 

Under this payment framework, investors provide financial compensation to an entity—be it a sovereign nation, a private enterprise, or a local community—to accomplish, document, and independently verify a set of performance objectives. 

These objectives are typically linked to outcomes of climate change mitigation or adaptation efforts. They include activities such as cutting greenhouse gas emissions, deploying nature-based solutions, or responsibly managing natural resources.

The WB’s payment acknowledges Vietnam’s achievement in reducing 10.3 million tonnes of carbon emissions between February 2018, and December 2019. This marks the largest single payment for verified and high-integrity carbon credits made by the FCPF to date.

The benefits of the payment are extensive, reaching 70,055 forest owners and 1,356 neighboring communities. These benefits are allocated according to a robust benefit-sharing plan developed through a consultative, participatory, and transparent process.

Vietnam’s Emission Reductions Triumph Paves the Way to Net Zero

Vietnamese Minister of Agriculture and Rural Development, Le Minh Hoan, emphasized the significance of this achievement. He stated that: 

“The success of this REDD programme brings Vietnam closer to delivering on our ambitious Nationally Determined Contributions under the Paris Agreement, while protecting areas of vital importance to biodiversity conservation.”

Furthermore, Vietnam has exceeded its emission reduction targets of 10.3 million stated in the Emission Reduction Payment Agreement. The Asian country achieved a total of 16.2 million tonnes of verified emission reductions. It can then sell the corresponding carbon credits to buyers via bilateral deals or carbon markets.

RELATED: Cambodia to Sell 15 Million Tonnes of REDD+ Carbon Credits

Vietnam can also decide to count the credits towards its Nationally Determined Contributions or retire them.

This success has prompted the World Bank to issue a call option notice to acquire an additional 1 million tonne emission reductions beyond the agreed contract volume.

Vietnam’s emission reduction program focuses on protecting its tropical forests, covering 3.1 million hectares of land. These forests are vital for biodiversity conservation, forming the backbone of internationally recognized conservation corridors and supporting various ethnic minority groups and forest-dependent communities.

In 2016, Vietnam’s net carbon sink capacity was 39 metric tonnes of CO2 equivalent (MtCO2e). The Southeast Asian nation pledged to achieve net zero emissions by 2050 during the COP26 World Leaders’ Summit in 2021.

The country’s National Climate Change Strategy underscores its determination to reach net zero, but dependent on international financial support. The strategy aims to:

Reduce 70% of remaining emissions by 2030,
Increase carbon absorption by 20%, and
Achieve a total sink capacity of 95 MtCO2e.

On top of it all, maintaining 43% national forest coverage is crucial for reaching net zero emissions.

As per McKinsey & Company analysis, Vietnam can achieve 2050 net zero through a concerted decarbonization effort across all seven sectors. The country’s REDD+ program falls under LULUCF (land use, land-use change, and forestry) sector.

Through a multifaceted approach involving enhanced forest management practices, strategic investments in the forestry sector, and agricultural policy refinements, Vietnam’s program aims to expand both the coverage and quality of forested areas while engaging local communities.

Unlocking Climate Finance Potential 

The Forest Carbon Partnership Facility is a global partnership aiming to reduce emissions from deforestation and forest degradation, conserve forest carbon stocks, and enhance forest carbon stocks in developing countries. 

Launched in 2008, the FCPF has worked with 47 developing countries across Africa, Asia and Latin America, and the Caribbean. It has contributions and commitments totaling $1.3 billion from 17 donors.

The FCPF plays a pivotal role in supporting REDD+ efforts through its two distinct yet complementary funds.

The FCPF Readiness Fund, operational from 2008 to 2022, has been instrumental in assisting developing countries in their preparations to engage in a comprehensive system of positive incentives for REDD+. Over its operational period, the Readiness Fund has disbursed a total of $472 million to support these critical readiness activities.
In parallel, the FCPF Carbon Fund serves as a mechanism for piloting results-based payments to countries that have demonstrated tangible emission reductions in their forest and broader land-use sectors. With a current funding envelope of $900 million, this Fund incentivizes emission reductions and promotes sustainable forest management practices.

Together, these funds under the FCPF framework provide a comprehensive and flexible platform for supporting REDD+ initiatives across the globe. The FCPF is advancing the goals of REDD+ while fostering sustainable development and environmental stewardship in forested regions worldwide.

READ MORE: What is REDD+? Development, Issues, and Solutions

Vietnam’s success underscores the transformative potential of rewarding climate action, offering a blueprint for sustainable development and environmental stewardship.

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Texas Withdraws $8.5 Billion from BlackRock Over ESG Investing

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The decision by the Texas State Board of Education to terminate its investment partnership with BlackRock has reignited the debate surrounding Environmental, Social, and Governance (ESG) investing in the United States. With $8.5 billion withdrawn from the investment giant, the move underscores the deepening divide between political and investment strategies.

At the center of this controversy is BlackRock, the world’s largest asset manager and a vocal advocate for ESG principles.

While BlackRock’s leadership in promoting sustainability and climate action has garnered praise from many investors and stakeholders, it has also drawn sharp criticism from some Republican politicians in states like Texas. These politicians accuse BlackRock of advancing a left-wing agenda and undermining traditional energy sectors.

The Rise of ESG Investing

ESG investing, short for Environmental, Social, and Governance investing, evaluates companies based on their performance across various responsibility metrics and standards to assess their suitability for investment.

By using these standards, investors can identify businesses that show strong environmental stewardship, social impact, and effective governance practices. ESG investing is also called sustainable investing, impact investing, and socially responsible investing.

Many ESG investors put a higher value on the environmental factor and remove environmental polluters from their portfolios. They instead decide to invest in companies that opt to reduce dependence on fossil fuels. 

READ MORE: ESG Investing with Carbon Credits – What Investors Need To Know

The state of Texas has been a battleground in the anti-ESG movement. State officials are taking decisive actions against companies and investors perceived to be prioritizing social and environmental concerns over economic interests.

For instance, Texas recently banned UK bank Barclays from participating in the municipal bond market due to its ESG policies. The state has also considered divesting from asset managers accused of boycotting energy companies.

Texas isn’t alone in rallying against ESG investing. In 2023, states with Republican-controlled legislatures saw the enactment of at least 25 anti-ESG bills.

Utah, in particular, passed 5 of these bills, contributing significantly to the overall count. Despite these legislative successes, a few bills are still pending approval. These developments were reported on a website maintained by Lichtenstein’s team, dedicated to tracking such bills.

Texas’s anti-ESG stance may appeal to some constituents. However, it could come at a significant cost to investors and the state’s economy. 

A study conducted by the Texas County & District Retirement System estimated potential losses of over $6 billion in ten years from prohibiting ESG investing in public retirement systems. This underscores the complex trade-offs involved in balancing financial returns with social and environmental objectives.

Moreover, MSCI’s report showed that the top 20 ESG funds saw increasing return contributions because of better ESG performance.

Chart from MSCI

Texas Takes a Stand

In defending its decision to terminate the partnership with BlackRock, the Texas State Board of Education cited legislation prohibiting investment in companies that boycott certain energy firms.

Board Chairman Aaron Kinsey expressed concern about BlackRock’s impact on Texas’s oil and gas industry. The Texas Permanent School Fund (PSF) gets its money from the industry’s revenue. 

In a statement posted on X, Aaron Kinsey, PSF Chair, noted that:

“BlackRock’s dominant and persistent leadership in the ESG movement immeasurably damages our state’s oil and gas economy and the very companies that generate revenues for our PSF… The PSF will not stand idle as our financial future is attacked by Wall Street.”

The statement reflects growing concerns among certain stakeholders in Texas regarding the influence of ESG considerations on investment decisions. And that it may also have potential impacts on the state’s energy sector. According to the state BOE’s website, Kinsey is the CEO of American Patrols, an aviation oilfield services company in Midland.

Critics argue that this may undermine the long-term financial health of PSF and limit its ability to achieve investment objectives. 

BlackRock Defends its Position

BlackRock has faced mounting scrutiny from Republican politicians and activists who accuse the company of promoting a leftist agenda. Last year, the asset manager inked a deal to invest $550 million in Occidental Petroleum’s Direct Air Capture (DAC) plant in Ector County, Texas. 

In response to the state’s decision, BlackRock’s CEO Larry Fink has defended the company’s engagement with the energy industry. He stated in an email that:

“The decision ignores our $120 billion investment in Texas public energy companies and defies expert advice. As a fiduciary, politics should never outweigh performance, especially for taxpayers.”

Despite these criticisms, BlackRock emphasized its significant investments in U.S. energy companies. Moreover, the company noted that it’s instrumental in assisting millions of Texans in investing and saving for retirement. They’ve also channeled over $300 billion into Texas-based companies, infrastructure, and municipalities, with a significant portion, totaling $125 billion, directed toward the energy sector.

Last week, the investment giant published a report identifying key developments that will impact low-carbon transition investment opportunities and risks in 2024.

READ MORE: BlackRock’s Insights on 2024 Low-Carbon Transition Investment Trends

As the debate over ESG investing continues to evolve, investors and policymakers must carefully weigh the potential benefits and drawbacks of incorporating environmental, social, and governance considerations into investment decisions.

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