Financing for lithium projects in the United States is facing challenges due to sustained low lithium prices, posing a threat to the development pipeline and potentially hindering President Joe Biden’s ambition to bolster the domestic battery supply chain.

According to the S&P Global Market Intelligence report, there are about 100 lithium mine projects planned across the US. However, the allure of these projects is waning amidst a steep decline in lithium prices. 

Navigating the Lithium Price Plunge

The sharp price decline has left many investors perplexed, particularly given the projected long-term demand for the mineral. Experts noted that it’s largely attributable to the slowdown in electric vehicle sales growth in China. This is also further compounded by the overall economic slowdown in the Chinese economy.

Market Intelligence data reveals an 81.7% drop in lithium prices from their 2022 peaks. This downturn made many projects less attractive to investors as the prolonged low prices persisted.

Existing US lithium producers, particularly those using brine extraction methods rather than hard rock resources, have managed to weather the price downturn to some extent. 

Current producers have learned to adapt to the changing market conditions. Some employed cost-cutting measures, like what Albemarle did, while others are scaling back on their expansion plans.

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

However, the impact of the market downturn has been felt more keenly within the pipeline of future lithium output projects.

Additionally, junior companies seeking to develop lithium projects in the US and elsewhere have encountered difficulties securing funding amidst bearish market sentiment due to the price decline.

The financing hurdles confronting US lithium projects underscore the delicate balance between market dynamics and the imperative to strengthen domestic supply chains for critical battery materials. 

Per Market Intelligence data, the price of lithium carbonate ex-works China battery stood at $14,750 per metric ton on March 6, down from its 2022 peak of $79,650/t on Nov. 30. Despite remaining 151.7% higher than the 2020 low of $5,850/t on July 31, current prices are not attractive for launching new projects.

Industry Insights and Uncertainties

The impact of low commodity prices on US lithium projects is significant in project development, particularly among smaller operators. These companies are finding it increasingly difficult to access funding due to concerns over returns.

Still, a junior Canadian lithium company, Li-FT Power (LIFT: LIFFF), remains committed to advancing the exploration and development of high-quality lithium assets in the country. It consolidates and advances hard rock lithium pegmatite projects in known lithium districts in Canada. 

Keith Phillips, the CEO of Piedmont Lithium based in North Carolina, shared insights on lithium mining, describing it as a cyclical industry prone to fluctuations. In an interview, Phillips remarked on the significant downturn in lithium prices, saying:

“With lithium prices down by 90% from a peak 16 months ago, just about every new development project is slowing down, which will lead to another supply crunch.”

The uncertainty surrounding demand poses a significant challenge for the lithium industry. While increased demand for reliable lithium, spurred by the US Inflation Reduction Act, could provide some relief to the industry, there are concerns about the limited progress in the project development due to low prices. 

This issue could potentially undermine the Biden administration’s objectives of reshoring critical supply chains. The IRA’s incentives should be able to adequately address this with proper incentives to promote domestic mining. 

The Role of IRA and Investments

The law’s incentives have attracted massive investment into the US battery supply chain, which was largely underdeveloped before the bill’s passage. Electric vehicles (EVs) that meet specific requirements related to final assembly, critical mineral sourcing, and battery material processing may qualify for a $7,500 tax credit under the IRA.

The rule has led to a notable increase in investments in domestic critical mineral projects by both miners and automakers. For instance, Piedmont Lithium Inc., a US-based lithium producer, was motivated to establish a lithium processing plant in Tennessee. Moreover, its lithium project in North Carolina is also expected to start this year. 

Ford Motor has planned to allocate $3.5 billion to construct a battery plant in Michigan, citing the IRA as a significant factor influencing this decision. Ford has also entered into supply agreements with several lithium companies in countries with free trade agreements with the US. 

This strategic move enables the automaker to incorporate materials from these countries into its vehicle batteries while still qualifying for tax credits under the IRA. Similarly, Tesla Inc., the EV giant, has established supply agreements with multiple miners, including Piedmont and Albemarle. 

Below is the investments to EV supply chain since the IRA has been enacted.

While there’s a strong demand for IRA-compliant material, the supply remains insufficient, according to Benchmark’s Williams. Albemarle CEO Kent Masters echoed this sentiment by expressing doubts about the effectiveness of the IRA in stimulating necessary investments. 

Masters emphasized that the law has not yet succeeded in bridging the pricing gap between China and North America. It means that further measures may be necessary to incentivize investment in domestic lithium production.

READ MORE: Why Lithium Prices are Plunging and What to Expect

Challenges in the US lithium project pipeline amid price declines highlight the balance between market forces and policy incentives. Despite efforts like the Inflation Reduction Act, uncertainties linger. Addressing these challenges is vital for US competitiveness in the global energy transition.

The post Issues Facing US Lithium Projects and Battery Supply Chain Plans Amidst Price Decline appeared first on Carbon Credits.

Xprize Foundation, a non-profit organization that encourages technological development, has introduced its latest initiative – the XPRIZE Water Scarcity competition. This groundbreaking competition offers a total prize purse of $119 million over five years.

Funded by Elon Musk, XPRIZE operates highly impactful, incentivized prize competitions that tackle some of the world’s most pressing challenges. These competitions are structured to push the boundaries of innovation and creativity, driving participants to develop groundbreaking solutions that have the potential to transform the world for the better.

At the heart of an XPRIZE competition is a powerful incentive structure encouraging individuals, teams, and organizations to channel their ingenuity and expertise toward addressing complex global problems. 

In 2021, XPRIZE launched the Carbon Removal competition. It aimed to encourage the development of innovative CO2 removal solutions to cut emissions. In April 2022, the competition then revealed the 15 winning teams which received $1 million each to fund their projects. This initiative has been closed this year. 

READ MORE: Musk-Funded XPRIZE Carbon Removal Reveals 15 Milestone Winners

Tackling the Global Water Crisis

The new XPRIZE competition offers a total prize of $119 million, made possible by the Mohamed bin Zayed Water Initiative. The primary objective of this competition is to address the pressing issue of global water scarcity by fostering the development of reliable, sustainable, and affordable seawater desalination systems. 

Although our planet is predominantly covered by water, only a minuscule fraction (0.5%) of it is readily available to support the needs of the Earth’s population, which currently stands at around 8 billion people. 

Water scarcity is a critical issue affecting 80% of the global population, posing serious threats to communities worldwide. With the water demand projected to outstrip supply by 40% by 2030, urgent action is needed to address this looming crisis. 

However, traditional desalination methods face significant challenges.

One of the major drawbacks of these methods their negative environmental impacts, worsening the very issues they aim to address. The energy-intensive nature of desalination processes leads to increased carbon emissions and energy consumption, further contributing to climate change.

Roughly 2.5% of the world’s total energy consumption is dedicated to treating contaminated water and managing water supply systems. Additionally, a significant portion of greenhouse gas emissions, approximately 60%, is attributable to energy consumption.

The carbon footprint linked to the reverse osmosis (RO) desalination process of seawater falls within the range of 0.4 to 6.7 kilograms of CO2 per cubic meter. This implies that desalinating 1000 cubic meters of seawater could potentially result in emitting up to 6.7 tons of CO2.

Existing desalination methods not only pose significant environmental risks but also remain financially out of reach for many low- to medium-income countries. Consequently, there is an urgent need for innovative solutions that can effectively harness Earth’s vast ocean water resources.

This is what the XPRIZE water competition tries to address. 

Innovating Solutions for a Thirsty World

The XPRIZE Water Scarcity competition aims to address the challenge by encouraging participating teams to develop novel desalination technologies. These technologies will pave the way for a future where clean water is abundantly available to all.

Competing teams are encouraged to develop solutions that not only address water scarcity but also contribute to broader sustainability goals, including climate action and ecosystem protection. Winning teams should excel at creating desalination technologies that possess several key characteristics:

Scalability
Cost-effectiveness
Reliability
Resilience in changing climate
Environmental sustainability

XPRIZE Water Scarcity is a multi-track competition, divided into two distinct tracks. Each track has its own objectives geared towards making a significant impact on global water availability.

Track A: The New Desalination System. This track offers a prize pool of $70 million and focuses on developing innovative desalination systems. Within this track, there are also Moonshot Awards totaling $20 million, intended to incentivize breakthrough innovations in desalination technology.
Track B: Novel Membrane Materials. With a prize pool of $9.5 million, Track B concentrates on the development of novel membrane materials for desalination processes.

Detailed competition guidelines and entry requirements are accessible in the Guidelines document by XPRIZE. Below are important milestones and timeline to remember. 

The success of the XPRIZE Water Scarcity competition holds the potential to make a profound impact on global water security and environmental sustainability. 

It can help unlock access to the vast reserves of seawater, make up more than 96% of Earth’s water resources. By incentivizing the development of new, reliable, cost-effective, and sustainable desalination solutions, the prize aims to address the root causes of water scarcity and alleviate water stress worldwide.

The post Elon Musk-Funded XPRIZE Launches New Competition: Water Scarcity appeared first on Carbon Credits.

As a major player in the global economy, India stands as an integral point of economic development and environmental responsibility. However, India is also the world’s third-largest emitter of CO2, after China and the US.

Studies show emissions could rise to 50% by the year 2030 in India. To counter this effect, a carbon tax has been implemented primarily aimed at reducing emissions and curbing the use of fossil fuels like coal, gas, oil, etc.

India’s proactive engagement in the G20, a response to the challenges posed by carbon emissions, and its collaboration with the EU underscore its commitment to global climate action. However, the overall picture is slightly different that what it seems at the outset.

In a recent development, the EU has decided to impose a carbon tax known as the Carbon Border Adjustment Mechanism (CBAM), effective from January 1, 2026, on the import of 7 carbon-intensive sectors including:

Steel products
Iron and iron ore concentrates
Cement
Aluminum products
Fertiliser
Hydrogen
Electrical energy

The CBAM roll out is planned in 4 phases as show in the following figure:

Source: indiabriefing.com

The tariff is as high as 20-35% on imports of these high-carbon goods. And now, India along with other Asian nations, have not taken this decision favourably. Rather, the bloc has strongly objected to the EU’s new, unfair tax policy.

Impact of EU’s Carbon Border Tax (CBT) on India 

Many government officials in India have considered the proposed CBAM as “discriminatory” and a “trade barrier” that would hit not only Indian exports but also those of many other developing nations. The World Trade Organization (WTO) has also raised concerns about the fairness of the EU’s taxation policy when India is already adherent to the Paris climate agreement protocols of becoming carbon neutral by 2070.

In 2022, 27% of India’s exports of iron, steel, and aluminum products worth USD$8.2 billion went to the EU. With this high tax value, the EU’s income is expected to surge by leaps and bounds while disrupting earnings for major Indian conglomerates like Tata Steel, Steel Authority of India, JSW Steel Group and Essar Steel India Limited.

In order to fully grasp the new CBAM tax implications, one only need to examine India’s exports to the EU in a single year (2022) as shown in the chart below.

Source: indiabriefing.com

India’s carbon tax rate is currently among the lowest in the world at just USD$1.6 per tonne of CO2 emissions. But The EU’s CBAM is poised to cripple India’s exports of energy-intensive items, including key trade items like steel, aluminum, cement, and fertilizers. The Indian export market is most likely to encounter increased production costs with a drop in demand and competition for their products within the European economy.

[PRESS RELEASE: India’s Green Actions – From Carbon Subsidy to Carbon Tax]

Among all these sectors, the steel industry is the toughest to decarbonize and has the highest carbon intensity, responsible for ~ 8% of global emissions.

It could be stated that the impact of the EU’s CBT on India will depend on the carbon intensity of exported products and their substitutes in the EU market. Products with high carbon intensity will face increased charges and low competition. However, if low-carbon alternatives for Indian products are unavailable in the EU market, the outcome of CBAM on Indian exports might be constrained.

Mr. Piyush Goyal, Commerce and Industry Minister of India has retaliated with his stern statement:

“India will address the problem of CBAM with confidence, and we will find solutions. We will see how we can convert CBAM to our advantage if it comes in. Of course, I will retaliate.”

The Indian government is seeking to file a complaint to the WTO against the EU’s tax policy to protect its domestic exporters and MSMEs. But the war of words doesn’t end there, with EU’s trade chief Valdis Dombrovskis stating:

“The European Commission had designed CBAM carefully so that it was compatible with WTO rules, applying the same carbon price on imported goods as on domestic EU producers”.

Yet, an amicable resolution of the conflict is still ongoing. India and the EU are in talks and are looking for solutions to minimize the impact of CBAM on the Indian carbon market.

READ MORE: Why India’s Path to Net-Zero is Different From Other Super-Emitters

India to Take Proactive Steps to Mitigate EU’s CBAM Fallout

While further developments are expected as this sage continues, the Indian government is already exploring various steps to tackle the potential consequences of the EU’s CBAM.

Developing a robust domestic carbon pricing system to incentivize emission reduction by companies and harmonize with the EU’s carbon goals. Encourage Indian businesses to analyze customs data, purchase and cost records, carbon footprints, transactional models, logistic flows, and overall global value chain. Evaluate the potential effect of CBAM on their operations and call for strategic changes to make Indian businesses more competitive.
Encouraging investment in renewable energy sources like solar and wind power, green hydrogen, and resilient agriculture to diminish carbon emissions. Most importantly, Mr. Piyush Goyal has also asked the automobile industry to boost electric vehicle (EVs) production to promote sustainable growth.
Ramping up domestic capacity and boost investment in carbon capture and storage technologies and mitigate the carbon footprint of heavy industries.

And while the EU’s carbon tax could be challenging for Indian industries, it might also spark a positive change in the Indian carbon market.

As we have seen, the Indian economy is highly resilient and can embrace the “challenge” as an opportunity for a smoother, green energy transition. The leaders of both parties are looking ahead to address the CBAM crisis diplomatically and fulfill their commitment to the Paris Agreement.

FURTHER READING: India Revises Its Carbon Credit Trading Scheme for Voluntary Players

The post India Challenges EU’s Carbon Border Adjustment Mechanism (CBAM) appeared first on Carbon Credits.

The Securities and Exchange Commission (SEC) approved a new rule mandating publicly traded companies to disclose their direct greenhouse gas emissions. The proposal received backing with 3 votes to 2 at a recent SEC meeting. 

The newly passed legislation titled “The Enhancement and Standardization of Climate-Related Disclosures for Investors” also requires US-based companies to disclose details on their use of carbon offsets, including the associated costs if the credits contribute to their emissions reduction targets. They also need to describe how climate change impacts their operations, financial condition, and strategies. 

Moreover, companies must explain the risks and how they’re managing them, such as the impact on revenue and expenses. 

RELEVANT: A Deep Dive into SEC’s Proposed Climate Disclosure Rule for Sustainability

What Emission Scopes Are Mandated?

The original SEC proposal initially required companies to disclose their Scope 1, 2, and 3 emissions. But Scope 3, which garnered controversy, was ultimately excluded in the final rule. 

Scope 1 refers to emissions directly emitted by the company while Scope 2 covers emissions from the fuel and energy purchased by the company. Whereas Scope 3 pertains to emissions generated by customers and suppliers. 

Scope 1 and 2 emissions are mandatory to report on, provided the company considers the information “material” to investors. Having this vital climate-related information will give investors insights to come up with informed decision-making. 

Scope 3 emissions were the subject of significant controversy due to the challenges associated with calculating indirect emissions, which impose the highest compliance costs on companies. Big companies, particularly those in the fossil energy sector, opposed this reporting requirement.

Thus, following an extensive public comment period, which garnered 4,500 letters and 24,000 comments, the requirement to disclose Scope 3 emissions was ultimately dropped.

For the past 2 years, the SEC has been deliberating on formulating standardized requirements for corporate climate disclosure. The goal is to establish a minimum standard for transparency in boardrooms. 

Now, the increased transparency required on the use of offsets would influence future purchases of carbon credits.

According to the final rule, companies will now be obligated to provide a detailed breakdown of the costs associated with carbon credits. Specifically, the approved proposal mandated that:

“The capitalized costs, expenditures expensed, and losses related to carbon offsets and renewable energy credits or certificates (RECs) if used as a material component of a registrant’s plans to achieve its disclosed climate-related targets or goals, disclosed in a note to the financial statements…”

This disclosure requirement is one of 3 main categories of information mandated in the amendments to the SEC’s final rule. 

Unpacking SEC New Rule’s Key Provisions

While it’s essential for every company to thoroughly understand the SEC’s official rule, spanning almost 900 pages, 3 key provisions stand out:

“Accelerated filers,” which are companies with publicly traded shares valued at $75 million or more, are mandated to disclose Scope 1 and 2 emissions.
Costs stemming from severe weather events and other natural disasters must be disclosed on financial statements.
Companies are obligated to disclose both the actual and potential material impacts of climate-related risks on their strategy, business model, and outlook.

The SEC made a significant revision to its earlier draft by removing a requirement to disclose expenditures related to “general energy transition activities” in financial statements. 

Instead, the final rule focuses specifically on disclosing expenditures related to carbon offsets and RECs, as confirmed by SEC officials.

Go over to SEC’s fact sheet that summarizes the specific rules that a registrant has to disclose.

The Commission estimates that around 2,800 companies have to prepare to report on their climate-related financial risks. That’s 40% of the 7,000 US public companies registered with the SEC.

Meanwhile, about 60% of the 900 SEC-registered foreign private issuers may also be subject to the new rule.

Accelerated filers, in particular, need to start disclosing their Scope 1 and Scope 2 emissions in 2026. Below are the compliance dates companies have to keep in mind based on their filer status:

LAF=Large Accelerated Filers, Non-Accelerated Filer (NAF), Smaller Reporting Company (SRC), or Emerging Growth Company (EGC).

Mixed Reactions: The Impact of SEC’s Climate Disclosure Rule

The new climate disclosure rule received both praise and criticism. Former SEC commissioner Allison Herren Lee commented that:

“The new rule, unfortunately, does little to prevent companies from making vague, untested and, most significantly, unsubstantiated, statements about their carbon footprints.”

On the other hand, supporters of the new rule noted that it’s a great milestone. For Lane Jost, head of ESG advisory at Edelman Smithfield, 

“There is ample room to argue the validity of this rule on all sides, but regardless, this is a historic day for enhancing common, comparable, and credible disclosure rules on climate risks for investors and issuers.”

The SEC rule marks a significant addition to the expanding global regulatory landscape for corporate climate disclosures. International companies gear up to comply with Europe’s Corporate Sustainability Reporting Directive, which mandates climate disclosures. And with California’s carbon emissions disclosure requirements introduced last year, the SEC’s rule further underscores the increasing importance of climate-related transparency in corporate reporting.

READ MORE: California Sets Precedent with New Corporate Climate Disclosure Laws

The post SEC Finalizes New Climate Disclosure Rule: Here’s What’s New appeared first on Carbon Credits.