How Does Carbon Capture and Utilization Work?

Carbon capture and utilization technology is not only useful, but a necessary strategy to reduce atmospheric CO2 levels, and stall an increase in global temperatures in the near future. It works to remove atmospheric carbon dioxide, and either reuse it or permanently store it.

There are a myriad of technologies and methods to achieve this, ranging from direct air capture to forestry.

Carbon Sequestration Definition

Carbon capture, or carbon sequestration is the process which captures atmospheric carbon dioxide that is often released by emissions-heavy industries such as energy, construction, manufacturing and transport. 

What happens after carbon dioxide is removed and then captured is called carbon utilization. It could be recycled and resold as an economically valuable product to industries. They would then convert this into end products to be sold, such as new materials or fuels.

Carbon fixation refers to the process in which the captured carbon dioxide is stored permanently in the earth, away from the atmosphere. The most common example of this in nature is the way plants convert atmospheric carbon dioxide into organic compounds (e.g. starch). 

However, there are also emerging artificial carbon fixation technologies, such as the Orca carbon capture project. The plant pumps water and the captured carbon dioxide deep underground, where it will be permanently stored in rocks.

Collectively, all these processes are known as Carbon Capture, Utilization and Storage (CCUS)

Why is Carbon Capture, Utilization and Storage Critical Right Now?

Carbon capture, utilization and storage technology has been around for a really long time. However, interest in this area has increased exponentially in the past few years, due to the urgent climate targets that need to be met in coming years.

During the Paris Agreement and COP27, the consensus was that time is running out to tackle climate change without drastic changes in the coming years. The agreement was to limit the increase in average global temperatures to 2C and ideally, to 1.5C with respect to pre-industrial levels. An increase above these values would lead to irreversible damage to the planet. 

In order to achieve this, the world would need to remove 1 billion tons of CO2 by 2025. While carbon negative renewable energy sources and planting trees can remove CO2 from the atmosphere, they are not sufficient to meet these climate targets. This is where the significant need for carbon capture and storage technology lies. 

The Basic Steps of Carbon Capture, Utilization and Storage

In CCUS, there are four main steps involved:

Sequestering CO2 at stationary sources such as power plants and industrial sites.
Transporting the captured CO2 to storage sites (this involves compressing or liquefying the gas)
Utilizing the captured carbon in various applications (e.g. carbonated beverages, gas injection for enhanced oil recovery)
Permanently storing the CO2

In this article, we are mainly focusing on the first step, which is carbon capture or carbon sequestration. 

Carbon Capture Methods

There are four main categories to which carbon capture methods belong to:

Pre-combustion carbon capture methods

This process removes carbon dioxide before the fossil fuels are burned. In this process, the fossil fuel undergoes a gasification process which turns it into a mixture of hydrogen and CO2. The hydrogen can be burned as a ‘clean’ fuel which does not produce CO2 as a waste product. 

The CO2 captured can then be compressed, transported and stored for other industrial uses. This method is one of the ways of producing ‘blue’ hydrogen fuel.

Since the CO2 produced in pre-combustion carbon capture methods is higher in concentration, CO2 removal is easier and more efficient compared to post-combustion carbon capture. However, the capital costs related to gasification are quite expensive, especially if it is retrofitted into existing facilities instead of new ones.

Post-combustion carbon capture methods

Post-combustion carbon capture and utilization methods remove carbon dioxide gas after the fuel undergoes combustion. It is the most widely used across industries for carbon capture. This is typically done at the exhaust where CO2 is emitted.  It uses specially designed filters or liquid solvents to separate the CO2 from the exhaust stream. 

The first stage will be the absorption phase, where the solvent absorbs the CO2. The second phase will be the ‘desorption’ phase, where a change in temperature will cause the CO2 to be released from the solvent, and thereby separating the CO2.

Another example of a post-combustion carbon capture technology in development is using lime to remove CO2. The byproduct will be limestone, which can be heated to separate the CO2.

Oxyfuel combustion methods

Oxyfuel combustion processes use pure oxygen instead of air to burn fuel. This will eliminate other impurities such as sulfur dioxide. The byproduct in this case would then only be water vapor and CO2 gas, which can easily be separated. 

Direct Air Capture

Direct Air Capture (DAC) is another novel carbon capture method. It removes CO2 from ambient air instead of only at stationary points of CO2 emission such as power plants. 

The difference here is that with DAC, even CO2 emitted in the past can be removed. This would allow more CO2 to be removed from the atmosphere, reducing the overall CO2 levels in the air.

With post-combustion carbon capture, you are only removing the CO2 that is being emitted at that time. Hence, it prevents a further increase in CO2 levels.

Due to the urgency of climate action that needs to be taken, DAC is increasingly gaining interest. One of the leading carbon sequestration companies in this area is Swiss-based Climeworks. It has launched the world’s largest direct air carbon capture facility in Iceland, called the Orca carbon capture project. 

The carbon capture plant would have an annual capacity to capture 4,000 tons of CO2. 

The Future of Carbon Capture

With more development of such carbon capture plants, the goal is to lower the cost of carbon capture and sequestration. One of the biggest hurdles in the large-scale implementation of carbon capture and storage technology is the cost.

Since emitting carbon is cheap, there is little economic incentive to employ carbon capture technology on an industrial scale. However, things are improving, with more interest from investors, governments and scientists in recent years.

The post How Does Carbon Capture and Utilization Work? appeared first on Carbon Credits.

First NFL Team to Buy Carbon Credits

One of the National Football League (NFL) teams, the Houston Texans, will buy carbon credits from Occidental Petroleum subsidiary, 1PointFive, to offset the footprint of their flights to other cities. 

From soccer or football to basketball, sports are fun and recreational but some of them can be worse for the environment. But simply throwing a ball around is not the problem; it’s the professional part of big-arena sports, especially the logistics behind the event that poses a concern. 

American football, for instance, is one of the most popular and profitable sports in the world. Fans are so passionate that many are willing to travel anywhere to see the game and their favorite team play live. 

85% of GHG emissions by major sports events come from the travel and accommodation of fans. 

Add to this the separate carbon emissions of each football team for their air travel like NFL.

Some teams have a large entourage of nearly two hundred people traveling for each game. This includes players, coaches, front office staff, equipment staff, and all the equipment.

Carbon Footprint of NFL 

Together, the four major North American sports leagues – NBA, NHL, MLB, and NFL – emitted around 122,000 metric tons of CO2 from air travel alone.

And among them, it’s the football league that has the least carbon emissions as it has the fewest games. But the NFL also has the most carbon footprint per game. 

In fact, the carbon footprint of the NFL during a one-day event in the 2005 Super Bowl reached 1 million tons. That’s equal to ~900,000 metric tons of carbon footprint. 

In an estimate, here’s a comparison of the four professional leagues’ travel emissions. The NFL has the highest carbon footprint for 2018 and 2020, despite the decrease due to the pandemic. 

Source: Seth Wynes

But the football league has been working hard to address the carbon emissions of its major game events. The league created an environmental program called “NFL Green”. 

Leaving a Green Legacy

NFL Green projects ensure that the league’s big game or event makes a lasting impact in each host community. Since 1993, the program has earned recognition for the Super Bowl as the greenest professional sports event in America.

An example projects is a coral reef restoration along the South Florida coast. Others include recycling and tree planting in a local city park – Eagles Forest. 

In 2019, the NFL joined the Green Sports Alliance — an environmental effort that includes 600+ teams, leagues, and venues. They’re committed to reducing waste, conserving energy and water, and other measures to slash footprint while increasing the sustainability of professional sports. 

The NFL Green’s director once said in an interview: 

“One thing is how do we mitigate the environmental impacts? How do we lighten the footprint? And the second thing is how do we create an enduring green legacy that we can leave behind in each community?”

NFL Green also works closely with the stadiums and facilities hosting events to enhance recycling waste rates. A more climate-friendly initiative is the NFL stadiums using renewable energy certificates or RECs to power its major events.

Doing so not only provides funding but also allows the team to mitigate the GHG impact of its energy use. 

But more interestingly, one of the NFL’s teams, the Houston Texans opted to buy carbon credits to offset their travel emissions.  

NFL Team to Purchase Carbon Credits 

The Houston Texans is currently the worst-ranked team in the NFL. 10 of the team’s 21 pre- and regular-season games will be played in other cities this season.

That means the team’s players will be flying, as well as their fans, to the venue. To offset the football team’s carbon emissions, they’ll buy carbon credits from Occidental’s 1PointFive.  

The amount of credits isn’t disclosed, but it will be enough to cover three seasons of flights, said the team.

They’ll be generated by Occidental’s direct air capture project in the Permian Basin oilfield of West Texas. The DAC project will remove 500,000 tons of CO2 each year, storing it deep underground. 

DAC is a technology that captures and removes CO2 directly from the atmosphere, which is then safely stored underground in geologic formations. It offers a practical solution for hard-to-abate activities, such as air travel, to help achieve climate goals.

Through their carbon credits deal, the oil giant will become the football team’s Preferred Carbon Removal Partner. It will also work with the Texans to educate fans on the importance of carbon removal.

President of 1PointFive, Michael Avery noted:

“We are excited to work with the Houston Texans and for their purchase of carbon removal credits enabled by Direct Air Capture. We believe Direct Air Capture is an efficient way to help reduce an organization’s carbon footprint and provides a solution that is particularly well-suited to addressing carbon emissions associated with air travel.”

The Houston Texans are the first NFL team to buy carbon credits to offset their air travel footprint. The NFL football team will pay Occidental for the credits linked to a share of the carbon captured. 

The partners said the CO2 will be captured in “saline reservoirs not associated with oil and gas production”.

The DAC plant is under construction and is expected to be done in 2024. 

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Alberta Prepares For Surplus of Carbon Credits

The Canadian province of Alberta made major changes to its carbon credits system in preparation for a future surplus of carbon credits that may flood the market. Alberta expects many carbon capture and storage (CCS) projects to come online from 2024 until 2030.

The amendments are made under Alberta’s Technology Innovation and Emissions Reduction (TIER) Regulation (AR 133/2019). They include creating two new types of carbon credits – the “sequestration credit” and the “capture recognition tonne.”

The changes bring the TIER system in line with the minimum federal standards while ensuring that the carbon credits system continues to work in Alberta. 

What is Alberta’s TIER? 

TIER implements Alberta’s industrial carbon pricing and emissions trading system. It imposes an emissions benchmark on Alberta’s large emitters (emitting 100,000 tonnes or more of greenhouse gas) and opt-in facilities (smaller emitters that voluntarily opt in). 

Facilities subject to TIER must meet their emissions benchmark by reducing their year-over-year operating efficiencies. In case they can’t meet the benchmark, they may choose to do any of these options:

Buy a “fund credit” from the TIER for each tonne of excess emissions
Submit Emission Performance Credits (EPCs) showing reduced emissions to below the benchmark in the previous or current compliance year
Submit emission offsets generated under an approved protocol

EPCs are tradable to other emitters to meet their compliance obligations. TIER-regulated emitters are exempt from carbon pricing under the federal Greenhouse Gas Pollution Pricing Act.

CCS and Carbon Credits in Alberta

The carbon capture and storage industry, popularly known as CCS, is on the rise and Alberta is keeping up with the trend. The province agreed with 25 major CCS projects to explore potential project areas.  

If all the projects go as planned, about 50-60 million tonnes of CO2 or its equivalent can be sequestered yearly. This can potentially create 50-60 million carbon credits. And that’s way more than expected of credits from projects under the TIER system. 

Carbon offset credits issued to date are registered with the Alberta Carbon Registries (ACR). The body also publishes each offset project’s plan and verification of registered offsets. Each project’s plan estimates the annual emissions reductions the developer expects the project to yield. 

Some think the flood of potential credits from CCS projects will cause their price to fall relative to the carbon price. This may restrict the deployment of CCS and the decarbonization of heavy emitters. These include Alberta’s power, oilsands, oil and gas, and other industries. 

But estimates show otherwise as seen in the chart below (CCUS also means CCS). 

Alberta TIER Carbon Credit Scenario (2021-2030)

Currently, a CCS project developer can create carbon credits for 20 years if it follows the Quantification Protocol for CO2 Capture and Permanent Storage in Deep Saline Aquifers

A facility can retire the credits as part of its compliance obligations under the TIER. The credit holder can also sell them to another facility or a company looking for offsets. 

Changes to Alberta’s Carbon Credit System

The major change to Alberta’s TIER regime is the creation of two new carbon credits.

Sequestration credits: 

Sequestration credits are also applicable under the Clean Fuel Standard. An offset can be converted into a sequestration credit if it meets certain criteria, which include:

produced in 2022 or later year
the CO2 sequestered must have been captured at a large emitter or opted-in facility (e.g. oilsands facility or fossil fuel power plant)

Sequestration credits may only be used for compliance for 5 years after generation.

Their creation may tell that some companies prefer to buy carbon credits from projects that permanently remove CO2 rather than projects that offset emissions. It will also be interesting to see if the new credit will trade at a premium price.

Capture recognition tonnes:

Capture recognition tonnes allow emitters to deduct sequestered emissions from their total regulated emissions at carbon capture sites. A sequestration credit can be converted into a capture recognition tonne if: 

the CO2 sequestered for the emission offset was captured at the facility applying for the conversion, and
the sequestration happened in 2023 or later.

The emitter can then retire the capture recognition tonnes and use them in calculating its net emissions from its facility. This will reduce its compliance emission obligations. 

Other amendments:

The scope of “large emitters” now includes a facility that imports ~10,000 tonnes of hydrogen in 2023 or later.

They also lower the minimum emissions threshold for opt-in facilities in emissions-intensive trade-exposed industries from 10,000 CO2e tonnes/year to 2,000 CO2e tonnes/year. This enables smaller emitters to opt into the program and increase demand for offset credits. 

Moreover, the current 8-year period for using EPCs will go down to only 5 years with a vintage year of 2023 or later. The amendments also expand the limit of using carbon credits in Alberta under TIER as a compliance method.

For 2023, a facility can still meet its regulated emissions by up to 60% through retiring carbon credits. But this will go up to 70% in 2024, 80% in 2025, 90% in 2026, and any year thereafter. 

The emissions intensity baseline will also be higher. A 2% annual tightening rate, from 1%, will apply to facility-specific and high-performance baselines. But for oilsands operations, this rate will go up to 4% in 2029 and 2030. 

Lastly, the carbon tax under TIER for 2023 through 2030 will increase along with the federal carbon price from $65 to $170 in $15 annual increments.

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Top 4 Carbon Stocks To Watch In 2023

After a record-breaking price run in the compliance and voluntary markets in 2021, many carbon stocks reached large market caps. With a softening of carbon prices across the board last year, however, some companies have retreated to interesting valuations.

Here’s how carbon prices performed last year…

Why Carbon Stocks?

Carbon stocks are an attractive option for investors looking to support the transition to a low-carbon economy and mitigate the effects of climate change. 

Companies from Amazon to Netflix and Xerox – and everyone in between – are releasing plans to disclose and reduce their carbon footprint. Most companies are targeting zero net carbon emissions (“net zero”) by the year 2050. But some have chosen much more aggressive targets.

Tech giants Apple and Microsoft, for instance, are committing to net zero by 2030. For companies like these, carbon credits and offsets as well as sequestration and energy reduction play a key role in their plans. 

Let’s take a look at some carbon stocks in 2023 to put on your radar.

1. Carbon Streaming Corporation (NETZ.NEO and OFSTF.OTC)

Carbon Streaming was one of the first publicly traded carbon stocks focused on offset credits. Being one of the first has allowed the company to become an early mover in the carbon credit space. It also enabled the firm to secure several sources of extremely high-quality carbon credits. 

Carbon Streaming trades on the NEO exchange in Canada, as well as the OTC market in the U.S. The company intends to list on the NASDAQ in the near future.

The company has been picked up by analysts at TD, Bank of Nova Scotia, BMO, and H.C. Wainwright, among other institutions, with an average price target of around US$4.50.

What are streaming and royalty companies?

Streaming and royalty companies are businesses that provide financing for the development of projects.
In exchange for providing financing, these companies receive a stream of future cash flows from the project, which is called a “stream” or “royalty.”
Streaming and royalty companies can be a good option for investors who want to support the transition to a low-carbon economy without having to bear the full financial risk of developing a project or asset.

These companies often have a portfolio of projects in different stages of development, providing diversification and reducing the risk for investors. 

In total NETZ has a portfolio of 21 projects in 12 different countries around the world.

The Rimba Raya Biodiversity Project in Indonesia is one of NETZ’s flagship projects. It’s one of the world’s largest REDD+ projects and addresses all 17 of the UN Sustainable Development Goals.

Carbon Streaming is a leveraged play on the demand and the value of carbon credits increasing in the voluntary carbon market.

Carbon Streaming Corp.’s Highlights:

Carbon credits expected to be issued from 10 or more carbon projects by the end of 2023E,
Currently trading at a significant discount to net asset value,
Management team has executed >$2 billion of streaming agreements and includes leading experts in the carbon markets,
The company expects moderate and then rapid growth of credits in the coming years, peaking near 20 million credits per year by 2027.

NETZ is an option for investors with a high-risk tolerance. The company was a the first of its kind in the carbon markets, and its unique business model could help it outperform the competition. 

It’s worth checking the company presentation out for those interested in carbon credit stocks and investments.

2. DevvStream (Private. Going Public in early 2023)

DevvStream is a new company that provides money for green projects in exchange for carbon credit rights: a potentially lucrative revenue model, as we established before. 

In addition to these rights, DevvStream manages the carbon credits generated by using an advanced blockchain-based ESG platform.

The primary business of Devvio, which is DevvStream’s parent company, is its proprietary blockchain-based ESG platform. 

As a B2B service, Devvio provides its corporate clients with a framework for global-scale enterprise management.

DevvESG offers regulatory-compliant transaction management and tracks assets for maintenance. It also has record keeping, automation, and ESG reporting capabilities. All of this is done transparently.

It was built with smart contracts through its proprietary blockchain. And that’s for a fraction of the transaction cost of other blockchain (i.e. 1/1,000,000th the energy cost of Ethereum). 

On top of this, Devvio’s platform is highly scalable. It can allow for over 8 million transactions per second. For reference, Visa only sees around 1,700 transactions per second worldwide.

And as Devvio is the majority owner of DevvStream, the latter is fully ready to make good use of its infrastructure.

Total ESG assets under management have more than tripled in the past decade, and analysts estimate that number will hit $41 trillion by the end of this year.

Globally, one in every three dollars of managed money belong to ESG-related assets.

On top of this, carbon markets are set to grow between 15x and 100x by 2030.

Put together, this gives DevvStream access to an extremely high-growth market which it can target thanks to the Devvio technology. Here’s a snapshot from their investor deck:

DevvStream’s Highlights:

What sets DevvStream apart from its competitors are its partnerships and the ecosystem that they play in both the voluntary and compliance markets.

For instance, through its partnership with its parent company, DevvStream gets direct access to all of the companies in Devvio’s ESG corporate client base who happen to be looking to buy carbon credits.

They also get the exclusive right to manage the data used to generate the carbon credits from their streaming agreements on Devvio’s blockchain platform for transparency and recordkeeping purposes. 

This gives them a major advantage over traditional carbon credits.

In addition to having access to all of Devvio’s corporate clients, DevvStream can also choose to sell its carbon credits on its partner Xpansiv’s CBL market.

Xpansiv is the largest voluntary carbon credit marketplace in the world, currently hosting over 90% of all transactions worldwide. Companies with major net-zero commitments like Chevron, Shell, Walmart, and Goldman Sachs – all use Xpansiv’s trading platform. 

Xpansiv and Devvio make the perfect partners for DevvStream. The latter provides both a blockchain platform for credits as well as access to an ESG customer base. And the former offers a secondary market for any of DevvStream’s excess credits.

DevvStream is another good option for investors with a larger appetite for risk. The company can leverage its unique partnerships to differentiate itself from its competitors.

You can learn more about DevvStream at their corporate page here.

3. Base Carbon (BCBN.NEO)

Like Carbon Streaming Corp., Base Carbon is also involved in financing carbon projects that generate voluntary carbon credits.

Base has two executed project agreements estimated to generate a total of 34 million carbon credits. This amounts to about 3 million tonnes per year at full production.

The company has committed USD$29.6 million for projects in Rwanda and Vietnam.

Project #1: Vietnam Household Devices

51.4% of Vietnam’s primary household energy is generated from solid fuel combusted within open fires or inefficient cookstoves for cooking or water sanitization.
Base Carbon will fund the manufacturing and distribution of 850,000 fuel-efficient cookstoves and 364,000 safe-drinking water purifiers to families in rural areas of Vietnam.

Project #2: Rwanda Cookstoves

Households in Rwanda rely nearly entirely on biomass for cooking and related purposes resulting in inefficiencies in fuel use and negative health impacts.
Base aims to facilitate 250,000 fuel-efficient cookstoves as part of the Tubeho Neza project, distributed to rural families, reducing consumption of wood by at least 71%

Base Carbon’s Highlights:

The projected growth of the voluntary carbon market will serve as an excellent catalyst for Base, which already has a steady source of carbon credit production locked in for the next decade.

Base has a healthy balance sheet with a strong cash position, and management is continuing to work on sourcing other high-quality carbon credit projects for the company. For instance, Base recently partnered with the Danish Red Cross to develop blue carbon projects in Southeast Asia.

In addition, the company boasts management, advisors and key insider ownership at 36.4% of shares outstanding. And institutional shareholders own another 27.7%. Base is a carbon stock where key players have a high degree of “skin in the game”.

Base is yet another option for investors with high risk tolerance. 

Its small market cap and thin volume could provide a fast-moving tailwind with any rise in carbon credit prices in 2023.

4. Brookfield Renewable Partners (BEP)

Rounding out our list is Brookfield Renewable Partners, one of the world’s largest publicly traded renewable energy companies.

One of the key things that sets Brookfield apart from many similar companies in the space is the fact that BEP is a pure-play renewable company.

What that means is that the entirety of BEP’s portfolio consists solely of renewable sources of power generation. This is unlike many other power companies whose portfolios often also include traditional fossil fuel power plants.

This focus on clean energy has made BEP a world leader in renewable energy and decarbonization technologies. Plus, they have projects all over the world in both Americas, Europe, and Asia.

Currently, BEP owns 24 gigawatts of power generating assets including 229 hydroelectric plants, 105 wind farms, 88 solar power plants and a number of other sustainable & distributed energy solutions.

BEP’s management team isn’t content to sit on their laurels, however. They have an extensive development pipeline in place, with 11 GW of power capacity. And that’s a 46% increase over what they have now – secured over the next three years.

Brookfield Renewable Partners’ Highlights:

Simply put, BEP is a well-established major company with a proven and stable business model, a strong balance sheet and tons of cash flow.

Over the past 5 years, BEP has averaged just over 5% dividend yield. Since their inception over two decades ago, their distributions have grown by an average of 6% each year. At the same time, the stock itself has seen average returns of 16% a year – an outstanding track record.

Plans and capital are already in place for BEP to grow their operating capacity by 46% over the next 3 years. If the company can fully execute their development pipeline, they’ll be able to multiply their power generation portfolio by 5x. It also means offsetting as much carbon each year as the entire country of Sweden produces.

On top of this, many companies right now are looking to reduce their reliance on carbon-emitting sources of electricity to hit their net zero targets. BEP, with their 100% carbon-free renewable energy portfolio, perfectly fits the bill for such companies.

For investors with a lower appetite for risk that still want exposure to the carbon markets, BEP is a great company to keep your eyes on. 

See Similar Article: Top 3 Private Carbon Stocks to Watch (CROY, GC3, Xpansiv)

Carbon Stocks Are Grabbing Investors’ Attention in 2023

As more and more public companies declare their net-zero ambitions and disclose their carbon emissions, responsible investing is becoming a hot topic in financial markets. Big money is pouring into renewable energy and offsetting emissions using carbon credits.

Meta, Apple, and Netflix are among the tech giants leading the charge towards net-zero targets by 2030. Meanwhile, major mining companies like Barrick and Newmont, as well as energy giants like Saudi Aramco, Exxon and Shell, are also making similar commitments.

These developments will likely increase investor interest in all things carbon-related in 2023 and beyond. As net-zero targets for 2030 draw closer, we can expect this trend to accelerate even further.

Carbon stocks could prove as a valuable addition to an investor’s portfolio as the world heads towards net zero targets.

Disclosure: Owners, members, directors and employees of carboncredits.com have/may have stock or option position in any of the companies mentioned: NETZ

Additional disclosure: This communication serves the sole purpose of adding value to the research process and is for information only. Please do your own due diligence. Every investment in securities mentioned in publications of carboncredits.com involve risks which could lead to a total loss of the invested capital.

Please read our Full RISKS and DISCLOSURE here.

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Abu Dhabi National Oil Invests $15B in Decarbonization Projects

Abu Dhabi National Oil Company (ADNOC) committed a $15 billion investment in low-carbon projects to curb operations emissions and meet decarbonization goals.

The United Arab Emirates oil and gas giant has unveiled its multi-year action plan, allocating $15 billion for various low-carbon projects across its diversified value chain by the end of the decade.

The UAE has committed over $165 billion to transition to clean energy. It’s the first Persian Gulf state to aim for 2050 net zero emissions.

Dr. Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology and ADNOC Group CEO, said:

“Cementing our strong track record of responsible and reliable energy production, ADNOC will fast-track significant investments into landmark clean energy, low-carbon and decarbonization technology projects. As we continue to future-proof our business, we invite technology and industry leaders to partner with us, to collectively drive real and meaningful action that embraces the energy transition.”

ADNOC Decarbonization Goals

As part of its sustainability goals, ADNOC plans to cut its carbon emissions intensity by 25% by 2030. This will strengthen its position as one of the least carbon-intensive oil and gas companies in the world.

ADNOC ranks in the top 5 lowest emitters in the oil and gas industry. It also has one of the lowest methane intensities (0.01%).

The UAE giant highlighted that its decarbonization goals build on its “strong track record as a leading lower-carbon intensity energy producer”. And that record includes these actions:

use of zero-carbon grid power,
committed to zero flaring as part of routine operations, and
deployed the UAE’s first carbon capture project at scale – Al Reyadah.

Middle East oil and gas firms are investing billions of dollars to scale up their hydrocarbon production capacities. But they’re also preparing to invest heavily in energy transition initiatives such as hydrogen and carbon capture and storage (CCS) projects.

The $15 Billion Projects

ADNOC said that throughout 2023, it will reveal a suite of new projects and initiatives to decarbonize operations. The company’s $15 billion investment includes:

A first-of-its-kind CCS project
Innovative carbon removal technologies
New, cleaner energy solutions (hydrogen and renewables)
Further electrification of operations
Measures to build on its policy of zero routine gas flaring
Strengthening international partnerships

The energy firm also said that it will apply “a rigorous commercial and sustainability assessment to ensure that each project delivers lasting, tangible impact”.

In December last year, ADNOC set up a new business called “Low Carbon Solutions & International Growth“. It’s in line with its goal to reach Scope 1 and 2 net zero emissions by 2050.

The new business will focus on CCS, renewables, and clean hydrogen. It will also help the company expand internationally in gas, liquefied natural gas, and chemicals.

UAE’s CCS Expansion Plan

Building on its Al Reyadah facility, which can capture up to 800,000 tonnes of CO2 annually, ADNOC also plans to deploy technologies to capture, store, and absorb CO2.

The company is also working on its next major decarbonization investment to curb emissions from its Habshan gas processing facility.

With ADNOC’s planned expansion of its CCS capacity to 5 million tonnes per annum by 2030, the UAE will be “firmly established as a worldwide hub for carbon capture expertise and innovation,” the firm stated.

Such CCS expansion represents an over 500% increase in the company’s carbon capture capacity.

ADNOC added that this plan seeks to support the scale-up of hydrogen and lower-carbon ammonia production in Abu Dhabi. They even plan to scale blue ammonia production capacity to 1 million tonnes per year at its Taziz facility.

UAE’s major energy player also confirmed that it has already delivered test cargoes of low-carbon ammonia to Europe and Asia.

The company’s expansion of its new energy portfolio will be possible via its stake in Masdar, the region’s clean energy powerhouse. ADNOC said Masdar is leading the UAE to develop a global position in green hydrogen.

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British Airways Gives Flyers Option to Buy Carbon Credits

British Airways introduced an option to all passengers who want to offset their flight emissions by buying carbon credits from a 3rd-party company.

British Airways added CO2 removal to its menu of carbon offsetting options via its upgraded climate platform, CO2llaborate. It allows passengers to tackle their carbon emissions when flying.

Cutting Carbon Emissions

The major UK airline already offsets the carbon footprint on all its flights within the country. The new initiative is part of the airline’s plan to reduce carbon emissions by 50% by 2050.

Not only does this give fliers a chance to calculate and address their flight emissions, but they can now buy carbon removal credits directly from their onboard aircraft seat.

Director of sustainability, Carrie Harris said:

“In 2019, when we committed to achieving net zero carbon emissions by 2050, we identified that a vital way to meet this goal would be by using carbon removals and we currently expect that these could contribute up to a third of our total action.”

The airline has already made the removal credits available to customers through its website and onboard flights.

British Airways’ move came days after it revealed its plans to buy 10 more aircraft from Boeing and Airbus. But some critics say that taking more flights can only worsen climate change.

Still, the airline company maintains that it’s taking actions to reduce its carbon emissions and cut its reliance on fossil fuels. These include improving operational efficiency, investing in more fuel-efficient aircraft, and scaling up the availability of sustainable aviation fuel (SAF).

Now the airline seeks to help hasten the scale-up of carbon removals solutions. And so, it now allows passengers to choose between a combination of SAF and either carbon offsets or carbon removals as a means of slashing their CO2 footprint.

CO2llaborate: Carbon Offsets & SAF vs. Carbon Removals & SAF

Carbon offsets come from projects that remove, avoid, or reduce emissions. On the other hand, carbon removals refer to projects that remove carbon.

In other words, when flyers choose carbon removals, they’re supporting projects (e.g., nature-based solutions or technologies) that withdraw carbon from the air and then store the carbon for the medium to long term. But if they pick carbon offsetting by buying carbon credits, they may be supporting a project that removes or reduces or avoids carbon.

British Airways’ flight emission calculation tool uses a slider that selects the amount of SAF and carbon removals, or SAF and carbon offsets. Flyers are also given a direct link where to buy carbon credits.

Here’s a quick overview of the airline’s process to show the difference between these two options, with an example of a flight. It’s a round trip between London and India.

A flyer can choose the most common ratio of 10% SAF and 90% carbon removals.

By comparison, going for more SAF results in a higher price.

Likewise, flyers can set any desired ratio of SAF to carbon offsets. Again, more SAF ratio will bring the total price higher. But overall, carbon offsets remain cheaper than carbon removals.

British Airways’ new carbon removal program will initially be available for flights from London Heathrow Airport to New York, Los Angeles, San Francisco, Chicago, Miami, Hong Kong and Mumbai.

British Airways and Carbon Removal

The airlines said that it worked with CarbonNeutral, a CO2 removal company. It will provide the carbon removal services to British Airways customers.

CarbonNeutral will remove 1 ton of CO2 for every passenger who flies British Airways, or 5 tons for a business class passenger.

Flyers can opt for a blend of two independently certified carbon removal projects on the CO2llaborate platform:

The Blue Carbon Mangrove Project – reforestation and revegetation of about 225,000 hectares of degraded tidal wetlands in Pakistan’s Indus Delta.
The Freres Biochar Project – based in Oregon, ensuring that the company’s biomass power production plant produce biochar (charcoal-like material that locks away carbon)

More CO2 removal projects will be added. The carbon offsetting option allows passengers to offset personal emissions by planting trees on their behalf in Brazil’s rainforests.

The new carbon removal program is available to all British Airways customers who fly on a long-haul route. It can be from any airport in Europe to any airport outside the continent.

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2023 is the Year for Green Hydrogen, Here’s How

Government subsidy programs in 2023 will help ensure that the global green hydrogen industry will transform from a hot table topic to a large-scale renewable power source.

Hydrogen is leading the debate on clean energy transitions, offering many uses but more so in providing renewable power. Green hydrogen, in particular, gets a lot of traction and is hailed as the energy of the future.

Meeting such a prediction needs trillions of dollars by 2050 – about $15 trillion or $800 billion of investments a year.

Major oil and power firms aim to bring huge investments to make green H2 a reality. Some of them are Shell, Adani, TotalEnergies, and ACWA Power.

While the private sector has a big role in making green H2 the future energy, the public sector also shares the same footing. A wave of government subsidies, some are already underway while others are still plans, will support the development of green hydrogen projects.

The most significant support program is most likely the U.S. hydrogen tax credits. But similar other programs are also available in the EU, UK, Germany, Canada, and India.

Several large-scale green H2 projects will reach their final investment decisions in 2023 or begin construction by the year’s end. Yet, to date, only 270 MW of green hydrogen projects are operating.

So how do all the green hydrogen subsidy programs stand this 2023?

Biggest Support for Green H2

The Inflation Reduction Act, signed into law in August 2022, offers tax credits of up to $3/kg to clean hydrogen producers for the first 10 years of a project’s lifetime. The amount of credit depends on the carbon emissions lifecycle of the project.

The tax credit can make green H2 cheaper to produce than grey hydrogen from unabated fossil fuels.

Though the US government is still revising the final details of the subsidy scheme, they’ll be up for release in the coming months. But complaints against the Act – for alleged violations of international trade rules – from affected nations may cause a bit of delay.

For instance, the EU, Norway, and Australia objected to the Act’s preferential treatment to US-made products.

Still, the US remains to be the biggest market for green hydrogen production in 2023. The tax credits are one reason for that. Plus, the $9.5 billion federal cash subsidy provided in the Infrastructure Investment and Jobs Act for clean H2 development.

The program includes $8 billion to fund at least 4 regional clean hydrogen hubs. The law defines the hubs as:

“networks of clean hydrogen producers, potential clean hydrogen consumers, and connective infrastructure located in close proximity”.

The goal is for those hubs to form a national clean hydrogen economy. It also pushes to cut the cost of green hydrogen to less than $2/kg by 2026 (from more than $5/kg today).

Estimates show that the cost of green H2 made through water electrolysis will decrease by 2050 to even less than blue H2.

Global Subsidies for Green Hydrogen

EU’s CCfD

The European Commission revealed its Carbon Contracts for Difference (CCfD) subsidies for green hydrogen through its Innovation Fund. The program supports a complete switch from natural gas to renewables in producing H2.

Under the CCfD scheme, the EU governments will pay end users, not the producers, a certain amount for not emitting carbon. And that includes the money saved from not paying a carbon price and a top-up subsidy to hit the strike price (cost of producing H2) as detailed in the CCfD.

The program aims to help the bloc achieve its goal of producing 10 million tonnes of green H2 by 2030 and importing another 10 MT by the same period.

The final details of this EU’s green hydrogen subsidy were due last year, but disagreement from the EP delayed it. A new draft proposal needs final agreement by all member states and the EP.

UK’s CfD

Same with the EU, the UK has also devised its own Contracts for Difference (CfD) subsidy scheme for clean hydrogen by the end of 2022. It will support up to 1 GW of green hydrogen projects with two rounds in 2023 and 2024. They have to be under construction or operational by 2025.

UK’s CfD also needs finalization, but it will help lower the price of making green H2 and scale it up. The government will shortlist green hydrogen developers showing interest in its subsidy program in early 2023.

Meanwhile, the Scottish government announced in December last year its $112 million Green Hydrogen Fund, calling for H2 project proposals early this year. The goal is to install 5GW of clean H2 by 2030 and 25GW by 2045.

Germany, Canada, and India

Germany’s H2Global green hydrogen subsidy program (for H2 imported into the EU only) is, by far, the most advanced scheme. It is a double-auction scheme: one for green ammonia and the other for green methanol and H2-based sustainable aviation fuels. It’s supported by an initial €900m ($959m) funding.

A special firm owned by the German government, the Hydrogen Intermediary Network Company (HintCo), will buy green hydrogen or its derivatives from international producers. Then HintCo can sell it to European customers.

And any cost difference between the purchase agreements and supply contracts will be made up from the government subsidy.

Germany aims to complete the auctions by mid-2023 but won’t launch the supply auctions until 2024-25.

For Canada, the scheme works differently from European models.

The Canadian government will introduce in the Spring a new tax credit of as much as 40% for H2 production. This program mirrors the US H2 tax credit system in which the credit depends on various factors. It will run until 2030 but is up for public consultation to finalize details.

While for the Indian government, it plans to mandate the use of green H2 in industrial sectors such as steel, oil refining, fertilizer, and cement production.

Part of that goal is a $2 billion incentive program that will most likely be officially revealed in April. This will make the country another major green hydrogen player in 2023.

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USPS Unveils Plans for Electric Delivery Truck Fleet

The U.S. Postal Service (USPS) recently announced that it will invest $10 billion for new electric delivery trucks.

USPS is set to buy around 66,000 electric trucks for its mail delivery by 2028. Depending on the success of this deal, the postal agency could potentially make all their delivery trucks electric. This number makes up roughly 25% of its current number of delivery trucks.

At present, USPS has 217,000 vehicles in its fleet. A lot of these are over decades old and contain outdated features. As most of these vehicles will soon need replacement, this would be the ideal time to switch to electric delivery trucks. 

The majority of the electric vehicles it will buy will come from Oshkosh Corp. Oshkosh is a company that specializes in manufacturing access equipment and specialty trucks.

USPC will buy 60,000 vehicles from Oshkosh. 45,000 of that number would be electric trucks. Upon the news of this contract, shares of Oshkosh went up by 2.7%. 

USPS will also buy 46,000 more vehicles from other mainstream companies. 21,000 of that number will be electric. 

The current fleet of trucks is around 30 years old and lack basic features such as air bags and air conditioning. The new mix of electric trucks are set to almost exclusively replace these older trucks.

Postmaster General Louis DeJoy also revealed plans to modify facilities to accept the new electric trucks.

Although it has plans to go all electric in the future, USPS still has to buy some trucks with internal combustion engines at the moment. This is because almost half of its current fleet are on long distance routes, delivering mail between different states. 

USPS will spend $9.6 billion on the vehicles and associated infrastructure. This includes $3 billion from the Inflation Reduction Act.

The Biden administration is keen to invest in electrification for state sectors. Earlier this year, the US Senate introduced a new bill to electrify non-tactical vehicles in the US military. 

Global Trend for Electric Delivery Trucks

Other logistics and delivery service companies have also revealed plans to turn delivery vehicles electric.

FedEx, for example, expects to be fully carbon neutral by 2040. It will only buy electric delivery vehicles from 2030 onwards. Its competitor, UPS, has plans to be carbon neutral by 2050. By 2025, it plans for 40% of its fuel consumption to come from alternative fuels. 

Similar net-zero commitments have been made by the UK government for its postal services. Earlier this year, it unveiled its net zero strategy for the Royal Mail to reduce its carbon emissions. Royal Mail plans to be net zero by 2040. 

Royal Mail has plans to increase its fleet of electric vans to 5,500 by the spring of 2023 and invest $15 million for charging infrastructure across the country.

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Are Carbon Offsets a Scam? Key Points to Consider

The world’s acceleration to corporate Net Zero has come under fire. Some critics argue that carbon offsets are a scam, but there are several key points to consider in the debate. 

Firstly, carbon offsets are a legitimate and effective way for individuals and companies to reduce their carbon footprint and mitigate their contribution to climate change.
Secondly, carbon offset programs are regulated by third-party organizations that verify the validity and effectiveness of the offsets purchased. 
Lastly, carbon offset projects often provide additional benefits beyond reducing carbon emissions, such as supporting renewable energy development and improving local economies.

By definition, carbon offsets are valuable certificates that are issued when carbon is removed or prevented from entering the atmosphere. That’s done through carbon removal technologies, by pumping CO2 into rocks, or even by planting trees.

In fact, producing and selling carbon offsets is becoming a lucrative business in the U.S., and first movers have a big advantage. Small farmers, ranchers, and landowners can earn extra income by optimizing their operations to produce carbon offsets.

Carbon Offset Market Size

When checking for legitimacy of markets, following capital flows and transactions provides clues. There are two main emissions markets – the compliance carbon market and the voluntary market

The transaction volume in the compliance market totaled $851 billion in 2021, while the voluntary market grew to $2 billion the same year.

Source: Global Carbon Credit Corp, Corporate Presentation August 2022

The Voluntary Carbon Market is one of the fastest growing markets in global capital. It has grown from nearly $300 million in 2019 to an estimated $1.8 billion in 2022.

Corporate Footprint: Carbon Offsets and Net Zero Plans

The arguments that carbon offsets are a scam are not shared when looking at corporate net zero pledges. According to Katusa Research, the number of companies that publicly declared net zero targets reached 3,152 in November 2022.

Companies like Netflix, for example, have excellent net zero and emissions reduction plans:

“By the close of 2022, Netflix will achieve net zero greenhouse gas emissions. To reach this goal, we are working towards reducing our internal emissions by 45% below 2019 levels by 2030”

There are many other global companies that disclosed their net zero targets and how to get there. UK’s Royal Mail, Stellantis, Pfizer, Levi’s, Del Monte Foods, among many others, have pledged to hit net zero.

Companies Selling Carbon Offsets

Consider one Tesla’s sources of revenue (and profit) has been the sale of carbon offsets. In Q1-2022 for example, Tesla earned $679 million in carbon credit sales.

A company that emits a certain amount of carbon dioxide through its operations can offset those emissions by buying carbon credits. They come from a project that reduces carbon emissions elsewhere, such as a renewable energy project.

Offsetting allows the company to neutralize its carbon emissions and reduce its overall impact on the environment.

Carbon Offset Regulation

A farmer can’t just create thousands of carbon offsets from his or her land by planting trees. There is a stringent carbon verification process and typically performed by one of the larger global services – like Verra and Gold Standard.  

Carbon offset programs are regulated by third-party organizations that verify the validity and effectiveness of the offsets purchased. For example, the Carbon Offset Integrity Standard (COIS) is an international standard that ensures carbon offset projects are real, permanent, and additional. 

This means that the offsets purchased represent real, verifiable reductions in carbon emissions, and that the reductions would not have occurred without the offset project.

Verified carbon offsets are definitely not a scam. Let alone the benefits they offer that can be environmental, social, and economic.

Extra Benefits of Offsets

Carbon offset projects often provide additional benefits beyond reducing carbon emissions.

For example, many carbon offset projects support the development of renewable energy, such as wind and solar power. This not only reduces carbon emissions, but also helps to diversify the energy mix and reduce reliance on fossil fuels. 

In addition, carbon offset projects can also provide economic benefits to local communities by creating jobs and supporting economic development. For instance, a carbon offset project may involve planting trees in an area where employment is scarce, providing employment  opportunities and supporting the local economy.

With all these points, can we still say that carbon offsets are a scam? We don’t think so; not all carbon offsets are a scam even if some of them may be. 

Otherwise, the BMO would not be confident in projecting that the market will grow 17.4x by 2050, relative to its 2020 traded volumes. And as more players and money are flooding the voluntary carbon market, its value seems to grow even more.

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