Debate surrounds the challenge of mitigating emissions from hard-to-abate sectors to achieve net zero by 2050. Critics argue the short-term cost of such measures might be high, preferring more effective decarbonization routes.

Carbon removal startup Parallel Carbon claims its pioneering technology addresses both challenges by capturing CO2 directly from the air while generating low-cost green hydrogen.

The company aims to launch a kilowatt-scale demonstration project by 2025, with carbon removal credits (CDR) already pre-sold. The credits sold covered the startup’s first year of operations, helping them get off the ground and build the project. 

How Parallel Carbon’s Dual Technology Work

Parallel Carbon’s technology employs hyper-reactive minerals and achieves both carbon removal for under $100 per ton of CO2 and clean hydrogen production for $1 per kilogram. Their approach combines Direct Air Capture (DAC) and Water Electrolysis processes, powered by solar and wind energy.

Beyond providing durable carbon storage, this approach generates high-quality CDR credits and green hydrogen to facilitate industrial decarbonization. Here’s the company’s technology in an overview. 

Their electrolyzer produces hydrogen by splitting a neutral-salt electrolyte into an acid and an alkali without generating chlorine gas. This system works similarly with the chlor-alkali process, minus the chlorine gas.

Simultaneously, a mineral sorbent in DAC extracts CO2 from the atmosphere, releasing it by dissolving in the acid. This captured CO2 can either be stored geologically or used in industrial processes. The sorbent is then regenerated with the alkali for subsequent CO2 capture.

Notably, though the electrolyzer may operate intermittently, surplus acids and alkalis sustain the mineral sorbent’s recycling. This ensures continuous direct air capture even during renewable power unavailability.

Addressing DAC Efficiency and Cost Challenges 

Parallel Carbon’s CEO Ryan Anderson highlights their technology’s flexibility, designed as a flexible industrial load operating on intermittent power. This aligns with clean hydrogen production tax credit requirements, ensuring minimal marginal electricity emissions for direct air capture’s carbon accounting.

Though this technology demands more energy input than conventional electrolyzers due to the simultaneous DAC, its reliance on low power prices potentially poses a challenge.

Estimated energy costs for this process, with renewable electricity at $30/MWh, amount to $1.50 per kg of H2 and $50 per tonne of CO2. Anderson foresees flexibility in cost allocation between hydrogen production and CO2 capture due to the dual product nature. He further noted that:

“For most direct air capture, operating with clean power is a necessity — I think that’s very challenging for other direct air capture technologies…over 90% of the energy for the process goes into the electrolyzer.” 

They target a cost of $400/tonne of CO2 captured and $2/kg of H2 produced by the late 2020s. They also intend to further lower costs to $100 and $1, respectively, by the early 2030s.

The startup, having secured $3.6 million in seed funding led by Aramco Ventures, aims to field-test a scaled stack producing 50 kg of hydrogen and capturing one tonne of CO2 daily by early 2025.

Parallel Carbon has pre-sold its carbon dioxide removal credits for operations beginning in 2025. As corporations eye 2030 climate targets, the voluntary carbon market has gained traction, although scrutiny surrounds carbon removal effectiveness.

Driving Costs Down and Ambitions Up 

Apart from the growing carbon credit market, DAC also largely benefits from highly lucrative government support in the United States.

Anderson emphasizes the measurable CO2 removal capability of direct air capture, ensuring high-quality climate action. However, he doubts industries’ preference for carbon removal over other decarbonization methods. Anderson had formerly worked as an analyst on carbon capture and storage for research firm BloombergNEF.

This skepticism is fueled partly by the expectation that the market will have a relatively limited quantity of high-quality credits available over the next 10-15 years.

RELATED: Voluntary Carbon Credit Buyers Willing to Pay More For Quality

Moreover, government subsidies like the 45Q tax credit incentivize carbon capture. Despite complexities in claiming multiple credits, Anderson sees potential for separate companies to leverage distinct tax credits.

The 45Q tax credit offers incentives of $85 per tonne of CO2 for point-source carbon capture that’s permanently stored. It would be $60 if the gas is used in industry or for enhanced oil recovery. 

Then the credit increases significantly to $180 (or $130) if the capture is from direct air capture. But for DAC to qualify for these incentives, it needs to capture a minimum of 1,000 tonnes of CO2 annually.

Anderson also estimates that even without subsidies, carbon credits from DAC are currently sold for over $600/tonne of CO2.

Looking ahead, Parallel Carbon eyes a commercial pilot in 2026 capable of 100 tonnes hydrogen production and 1,000-2,000 tonnes of CO2 capture a year. The DAC company is also planning a Series A fundraising round to propel its vision forward.

Parallel Carbon pioneers technology that captures CO2 from the air, generating low-cost green hydrogen while directly addressing emissions challenges. Their innovative approach offers durable carbon storage and facilitates industrial decarbonization. With promising advancements and investments, they aim to revolutionize carbon removal and hydrogen production, positioning themselves at the forefront of sustainable innovation.

READ MORE: Carbon Removal Startups Are Finding More Places and Funds to Store CO2

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Retiring carbon credits can be a powerful tool for individuals and businesses to offset their carbon emissions and contribute to a greener future. By retiring these credits, we can ensure that the emissions reduction achieved is permanent and not double-counted, creating a more transparent and effective carbon market. 

This approach not only helps combat climate change but also encourages the development of sustainable practices and technologies. 

If you’re into knowing about how the process works, this article will explain everything you need to know about carbon credit retirement. Let’s begin by explaining how these credits work.

Understanding How Carbon Credits Work

Carbon credits are tradable certificates that give entities the right to emit a tonne of CO2 or its equivalent. They are generated by projects that reduce or remove CO2 from the atmosphere like planting trees. 

The credits serve as a permit, allowing the holder to neutralize their emissions. In that way, they work like renewable energy certificates (RECs) which are also a market-based instrument that certifies the holder owns a megawatt-hour of electricity from a clean energy source. 

READ MORE: What are Renewable Energy Credits vs. Carbon Credits

Essentially, RECs are a type of carbon credit alongside many others. These credits come in two major categories: compliance and voluntary markets. 

In the voluntary carbon markets, carbon credits are also called offsets. Emitters voluntarily bought them to offset their greenhouse gas emissions. 

In the compliance markets, businesses’ emissions are ‘capped’. If they go beyond that cap or limit, they’re fined or they can buy carbon credits corresponding to the amount of their excess emissions. 

The Lifecycle of a Carbon Credit

Retiring carbon credits involves a series of stages. But let’s focus on the last three crucial steps that ensure the integrity of the credits, the process of trading them, and what it means to retire them. 

The verification process is critical for ensuring the accuracy, transparency, and integrity of reported project data. Verifiers have to confirm a project’s compliance with the carbon program’s eligibility criteria. They validate the collection of project monitoring data as per program requirements and verify the accuracy of emissions reduction calculations based on approved methodologies.

After a project has undergone the verification processes, it becomes eligible for registration within the program. In other words, the credits they generate are now available for trading. 

Carbon credit trading has become very popular today among individuals and organizations and various carbon exchanges began to emerge. This is happening for a simple reason: Reducing GHG emissions is a global initiative and the carbon market offers great opportunities for entities seeking to cut their emissions.

You can buy or trade carbon credits for retirement purposes through various platforms. There are a couple of online carbon credit marketplaces and spot exchanges to choose from. 

Here are the top four carbon exchanges this 2024 that you can consider. You can also try popular marketplaces like the one that Salesforce launched or that of Alcove’s.

Lastly, let’s move toward the end goal of carbon credit trading – retirement. 

The Retirement Process Explained

Carbon credit retirement also means their death. 

A carbon credit is retired once its benefit has taken place. That means it has been used and the carbon benefit it represents has been claimed by the entity that bought it. 

Retiring your carbon credits requires you to ensure that they are removed from the marketplace and labeled as ‘retired’ in any records or registry. The retired credits must serve their emission reduction purpose only once to prevent double counting. 

Take note that retirement only occurs once the impact has happened. This means retiring your carbon credits depends on what type of credit you purchase. 

If you’ve bought ex-post carbon credits, you can retire them right after your purchase. You can then instantly get the proof of retirement.

For ex-ante and pre-purchase carbon credits, retiring them won’t happen immediately after you bought them. That’s because their impact hasn’t yet occurred and their retirement should be in the future. You should know when the timeline would be from the seller or the marketplace where you purchase the credits. It may take months or even years, depending on the specific project you invest in.

Impact and Benefits of Retiring Carbon Credits

By buying carbon credits, entities help fund efforts that support decarbonization elsewhere. These initiatives often yield positive benefits to the environment and local communities. More importantly, each credit retired helps quantify the actual environmental impact of those projects.

When it comes to the impact of retiring carbon credits on investors, be it individuals or companies, it has two major effects. 

First, it preserves the integrity and effectiveness of emission reduction projects. It prevents double counting or reusing of the credits by multiple entities. This further guarantees transparency and accountability in the carbon markets. 

In effect, carbon credit retirement instills confidence among companies regarding the impact of their purchases or investments. 

Thus, secondly, retiring carbon credits helps build a good reputation and enhance brand value of your company. Take for instance the case of large businesses supporting various carbon reduction projects.

Giant technology companies like Microsoft and Apple have been investing millions in carbon offsets from projects that either reduce or sequester carbon from the atmosphere. 

As they do that, they’re not only addressing their emissions but also dealing with their corporate sustainability. 

The Role of Carbon Credits in Corporate Sustainability

So, how do carbon credits become the new currency of ESG investing to meet environmental obligations and corporate sustainability? 

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

In the U.S., the coin of the realm is dollars while in the EU, it’s Euro. In the ESG world, it’s the carbon credit. Carbon credits are taking a small space on the ESG goals of businesses. 

But as more companies are pledging to reach net zero, these credits are also gaining more momentum in ESG investing to ramp up carbon emission reductions. And slashing emissions has now become a critical element of corporate and environmental responsibility to help fight climate change. 

Corporations use carbon credits to reach their net zero, carbon neutrality, or carbon negative goals. As such, research firms estimated that the carbon market will grow as much as 30x more by 2030. If that happens, the market will be as huge as the NASDAQ stock market by the decade’s end. 

According to the independent firm Katusa Research, the overall carbon market (compliance and voluntary) could be on equal footing as the oil market.

Source: Katusa Research

The burning of fossil fuels emits carbon dioxide, contributing to climate change. Different corporate climate goals mean different things. 

Achieving carbon neutrality means balancing emitted and removed CO2. Daily actions like driving emit CO2, but walking or using renewables can reduce it. Carbon credit offsets fund CO2 removal projects. 

Carbon negative goes beyond neutrality, removing more CO2 than emitted. For instance, Microsoft aims for carbon negativity by 2030, promising to remove all emissions since its founding. H&M and Ikea also strive for “climate positive,” akin to carbon negativity efforts. Their strategies involve sustainability investments and reduced emissions.

Best Practices in Carbon Credit Retirement

Now, that you know how carbon credits work, the importance of retiring them, and the processes involved, there’s one more thing left to keep in mind. What are the best practices to follow when retiring carbon credits?

We summarize them in two essential points: selecting the right carbon credit projects and transparent reporting of the retirement. 

As mentioned earlier, there are plenty of projects generating carbon credits. There are 170+ of them as per the Ecosystem Marketplace report. 

So, you must choose the ones that suit your purpose very well. If you’re into nature-based initiatives, you may pick from the different forestry and land use projects, i.e. REDD+. But if you’re operating in the power sector, you may want to go for renewable energy such as supporting solar or wind projects.

Regardless of your choice, be sure to be informed of the existing standards and methodologies for that project. This is crucial so that your carbon credit investment would count by actually reducing emissions. That entails being transparent in reporting your retirement. 

Transparency is one of the biggest concerns plaguing the carbon market right now. Questions were raised as to the effectiveness of carbon projects in delivering their emission reduction promises. This caused a rapid decline in voluntary carbon credit prices, particularly the nature-based offsets. 

Yet, current and future innovations in carbon credit markets show that they are here to stay and will continue to play a significant role in curbing GHG emissions. 

The Future of Carbon Credits

Recent innovations such as the launch of insurance products that protect carbon credits indicate that the market is heading in the right direction. Application integration like the case between Alcove and Shopify is another important market development that tackles transparency in credit retirement.

The use of blockchain technology is also considered a solution to make carbon credit retirement easier to track. Add to this the big players entering the market to further address transparency in tracking the lifecycle of each credit. For example, the NASDAQ exchange launched an innovative technology to revolutionize the industry.

Nasdaq’s new approach uses smart contracts for secure transactions and promises to bring much-needed standardization to attract investors​​.

Moreover, announcements by countries to integrate carbon markets into national registries also suggest that trading and retiring carbon credits would become the standard in curbing emissions and fighting the climate crisis.

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Britain is gearing up to impose a carbon tax on imported goods in a move announced by the Treasury aimed at safeguarding UK firms against being outcompeted by foreign manufacturers.

The proposed tax, also called the Carbon Border Adjustment Mechanism (CBAM) is set to take effect in 2027. It aims to ensure that imports like iron, steel, aluminum, ceramics, and cement face a similar carbon price to domestic goods. The move intends to maintain fairness in the market.

What is the UK CBAM?

Governments use a carbon price as a tool to curb emissions by imposing charges on carbon pollution. The goal is to encourage industries to reduce their greenhouse gas emissions.

Chancellor Jeremy Hunt highlighted the role of their British CBAM version, saying:

“This levy will make sure carbon-intensive products from overseas — like steel and ceramics — face a comparable carbon price to those produced in the UK so that our decarbonization efforts translate into reductions in global emissions.”

The UK government noted the new tax would help address “carbon leakage” which has become more pressing. This means avoiding emissions being displaced to other countries that have lower or no carbon pricing mechanisms in place. 

The CBAM will work hand-in-hand with the UK Emissions Trading Scheme. It’s the same as how the EU’s CBAM functions in parallel with the EU’s ETS. 

RELATED: EU Enacts New Reporting Rules for CBAM: Here’s What To Know

According to the Treasury, these plans will help level the playing field and encourage greater investment in net zero efforts. 

Under the proposed CBAM, charges will be determined based on the volume of carbon emissions produced during product manufacturing. The difference between the carbon price applied in the country of origin and that paid by comparable UK manufacturers will also influence these charges.

What Emissions Scope is Covered? 

The importer of imported products covered by the UK CBAM will be liable for the tax based on the products’ embodied emissions. It will not include the trading of emissions certificates.

The emissions scope categories that would be under CBAM are as follows:

The UK CBAM will also extend its coverage to Scope 1, Scope 2, and specific precursor product emissions found in imported products. This extension aims to align with the coverage provided by the UK ETS.

The UK ETS is designed to regulate and put a price on GHG emissions produced by domestic industries. Operating on a cap-and-trade mechanism, this system allows the market to determine the value of emission allowances. The total carbon emissions allowed and the corresponding allowances are capped under this scheme, gradually decreasing over time.

As part of the strategy to address the risk of carbon leakage within sectors covered by the UK ETS, a segment of UK ETS allowances (UKAs) is allocated to operators in exposed sectors without charge. This allocation ensures that certain operators receive allowances for free, thereby reducing their exposure to the carbon price. 

However, this measure also retains the economic motivation for these operators to invest in decarbonization initiatives. Thus, it maintains the overall emissions cap across the sectors included in the ETS.

Closing Carbon Loopholes

Following a consultation on solutions for carbon leakage, the Treasury reported that 85% of respondents identified the issue as a present or future risk to their efforts in achieving decarbonization.

There’s a growing concern that while companies in the UK work towards reducing GHGs, equivalent efforts are not mirrored abroad. This gap may result in emissions merely shifting to countries without ambitious net zero targets, providing limited global environmental benefits.

To address these concerns, implementing a suitable carbon price like CBAM is considered a significant step to mitigate carbon loopholes.

The Treasury plans to engage in further consultations in 2024 concerning the levy’s specifics. These include its design, implementation, and the comprehensive list of goods and products subject to the levy. 

Moreover, it seeks input from various sectors, including power, aviation, and industry, regarding the UK Emissions Trading Scheme.

READ MORE: UK Carbon Credit Scheme, ETS, Under Fire for Profitable Plant Closures

The Chairman of the Environmental Audit Committee emphasized the necessity of addressing emissions associated with imports, constituting 43% of the UK’s consumption emissions. This is to prevent undermining the UK’s decarbonization efforts. 

Implementing an appropriate carbon price at the border will play a crucial role in closing carbon loopholes.

The UK’s introduction of the carbon tax marks a significant step toward aligning carbon pricing and ensuring fairness in global markets. By covering a wide scope of emissions, the CBAM intends to close carbon loopholes, encouraging industries to invest in net zero efforts and supporting the nation’s decarbonization journey.

The post UK Reveals Move for a Carbon Border Tax in 2027 appeared first on Carbon Credits.

A state in India, Gujarat and it’s forest department, has taken significant strides in the battle against climate change by inking 3 crucial Memorandums of Understanding (MoUs) worth Rs 2,217 crore or over US$266 million of carbon credits from planting mangroves. Deals have also been signed in the area of carbon credit through agroforestry. 

The initiative, which is the first-of-its-kind in the country, is part of the upcoming 10th Vibrant Gujarat Global Summit. It’s a pioneering effort in India’s fight against the adversities of climate change.

Exploring Ways to Sequester Carbon

India had revealed its new climate change commitments to reduce emissions intensity of its GDP by 45% by 2030 from 2005 levels.

The country’s holistic approach to climate involves several things. Alongside the mangrove plantation deals, the forest department has also entered into agreements in agroforestry. 

It showcases the state’s commitment to exploring different methods for carbon sequestration. This highlights the importance of promoting sustainable land use practices in the region. 

In 2022, the world’s 3rd-largest emitter captured the carbon market spotlight with several climate action plans proposed. The country first planned to begin carbon trading for the heavy emitting sector, including energy, steel and cement. This is all part of India’s goal to hasten transition to cleaner energy and reach its 2070 net zero emissions.

RELATED: India Gets Carbon Market Spotlight with Various Climate Plans

In a parallel endeavour, beyond the MoUs, the Gujarat government is actively investigating carbon sequestration in wetlands. A study found that wetlands can store 81-216 metric tons of carbon per acre, depending on their type and location. 

The Gujarat Ecological Education and Research (GEER) Foundation, an autonomous body affiliated with the forest department, is conducting a comprehensive carbon study at 4 Ramsar sites in the state: Nal Sarovar, Thol, Khijdia and Vadwana.

Ramsar sites refer to sites listed on the List of Wetlands of International Importance. India boasts a total of 75 Ramsar Sites, which altogether span an expansive 13,26,677 hectares.

Racing Towards Net Zero

Another remarkable event on the horizon is a dedicated conclave scheduled from January 10 to 12, focusing specifically on Dholera. It is a burgeoning greenfield smart city with a footprint of 920 square kilometers, 100 kms away from Ahmedabad city. 

Dholera is the biggest of the 8th industrial greenfield cities under development in the 1st phase of the 100 billion-dollar project. The gathering aims to spotlight Dholera’s potential as a hub for smart businesses illustrated below.

Source: TheWire

Smart cities are now becoming a trend for countries to green the urban areas and businesses. In 2022, Saudi Arabia revealed its The Line, a zero-carbon city in NEOM. It’s 200 meters wide, but 170 kilometers long, and 500 meters above sea level.

RELATED: Saudi Prince Reveals Design of the City of the Future in NEOM

The Gujarat Global Summit also includes a pivotal seminar entitled “Towards Net Zero” on January 12. The event aims to bring global and national leaders to discuss India’s pledge to fight climate change. 

Principal Secretary (Forest and Environment) Sanjeev Kumar further noted that the aim of the seminar is for the participants to “share their views on net zero, decarbonization of the economy and carbon trading.”

Carbon credits, despite experiencing historic lows in terms of prices last year, are seen to play a crucial role in reducing harmful emissions. Not only India but also many other nations are strengthening their carbon credit markets to promote transparency and integrity. 

African countries also find carbon credits a crucial tool in drawing in funding from rich nations. Several countries in the region have announced their major carbon credit deals and market schemes last year. 

READ MORE: UAE to Power Up African Carbon Credit Market with $450M Pledge

The strategic initiatives by the Gujarat government in carbon credits underscore its unwavering commitment to sustainable growth and development. The collective efforts align seamlessly with India’s overarching goals to mitigate climate change and propel economic progress in a sustainable direction.

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