Climate Change Made an Early Heat Wave in West Africa 10 Times as Likely (NY Times)
America’s Climate Boomtowns Are Waiting – Temperature will also make Michigan an attractive destination for climate migrants (The Atlantic)
You don’t have to admit there’s a climate crisis to be fighting climate change (CNN)
Our built world is the biggest contributor to greenhouse gas emissions. Here’s how to change that (Euronews)
World Water Day important reminder of global water issues, says head of Global Water Organization (Arabnews)
Climate change report predicts devastating worldwide impacts (WSWS)
Global sea level jumped due to El Niño and climate change, says NASA (Le Monde)
Climate report issues ‘red alert’ warning after record-breaking temperatures caused ‘misery and mayhem’ in 2023 (Sky)
The Oil and Gas Industry Wants ‘Energy Transition’ to Mean More Fossil Fuels (Time)
The clean energy transition is happening. But Big Oil isn’t budging. (Earth Justice)
Disruptive innovation is the key to plastics sustainability (Fast Company)
The shipping industry is being lined up as a guinea pig for a world-first: a global, mandatory charge on greenhouse gas emissions. (Bloomberg)
The Environmental Impact of Government Contracting: Best Practices for Sustainability (Ein News)
Japan updates carbon offset guidelines to align with international standards, selects latest JCM projects (Carbon Pulse)
Unlocking nature’s potential: Harnessing soil carbon sequestration for climate resilience (Farm week now)
Blockchain Could Be Catalyst for More ESG Adoption (ETF Trends)
More mining is needed for the energy transition. It’s also a threat. (Market Place)
Sharing the Path to a Resilient, Secure Energy Grid: Highlights from The Energy Transition Summit (Energy.gov)
US Court Temporarily Pauses SEC Climate Disclosure Rule (ESG Today)
Navigating the complexities of carbon markets proves to be a complex task. Carbon credits encompass various dimensions, including issuance timing (classified as ex-ante, ex-post, pre-purchase) and their climate impact (differentiating between reduction and removal). Moreover, carbon credits can be categorized into tech-based and nature-based solutions.
Carbon credits originate from initiatives or endeavors aimed at reducing or removing greenhouse gas emissions. Each credit symbolizes the reduction of one metric ton of carbon dioxide equivalent (CO₂e). In essence, one carbon credit equates to the avoidance or removal of 1 tonne of CO₂.
These credits are procured by various entities, including corporations, individuals, and organizations seeking to offset their greenhouse gas emissions or contribute to efforts aimed at reducing carbon dioxide emissions. The primary marketplace for trading carbon credits is the Voluntary Carbon Market, where prices are dictated by factors such as the nature and effectiveness of carbon reduction projects, as well as the demand for credits generated by these projects.
1.1. Main Stages
Progressing from project planning to verification and certification, carbon credits typically undergo a multi-year process before issuance. This includes oversight by project developers, evaluation by standards bodies, and eventual sale to entities seeking emission offsets.
1.2. Carbon Credits Retirement
Retiring a carbon credit signifies its utilization and the claimed carbon benefit by the purchasing entity. This action removes the credit from the carbon market, preventing further sale or trade. Once the carbon benefit is realized, the credit is retired within its registry, ensuring traceability of the purchase and impact while avoiding duplicative counting. The retirement of a carbon credit guarantees the permanent recognition of its environmental benefit. Once retired, the credit becomes ineligible for resale, transfer, or further use in offsetting emissions. This process is essential for upholding the integrity and efficacy of carbon offset programs and standards.
Purchase vs. Retirement?
When a buyer purchases carbon credits, the immediate positive impacts of these credits are not directly tied to the transaction. Instead, the buyer holds onto ownership until they opt to retire them. Carbon credits can be traded among various market participants, potentially persisting unredeemed for a period. To prevent double counting, it’s crucial to distinguish between these two timelines on carbon offset certificates.
Upon retirement, carbon credits are permanently removed from circulation, rendering them ineligible for further resale. After retirement, the buyer can rightfully claim the positive impacts represented by the credits. Once retired, a credit’s ‘life’ ends as it cannot be utilized or claimed again.
Only the stakeholder who retires the credit can attribute the emission reduction to their climate targets, and this can only occur once. Retirement is vital for maintaining credibility and preventing the same benefits from being claimed multiple times.
Carbon credits exhibit variations not only based on the projects they are associated with but also concerning their issuance timing. There are three distinct types of credits emerge:
2.1. Ex-post Credits
These represent verified emission reductions or removals that have already occurred, offering reduced risk for buyers.
Examples:
In an afforestation or reforestation project, ex-post carbon credits indicate that the forest has already matured, effectively capturing and storing the intended volume of carbon emissions.
Carbon Capture and Storage (CCS): Following the operational phase of a CCS project, wherein a specified quantity of carbon dioxide emissions from industrial processes is captured, the captured carbon data undergoes thorough measurement and verification. Subsequently, carbon credits are issued in accordance with the verified outcomes.
2.2. Ex-ante Credits
Issued based on anticipated future benefits, these credits involve some level of risk as the impact has not yet materialized.
Examples:
Afforestation and Reforestation Projects: These initiatives involve planting new forests (afforestation) or restoring depleted ones (reforestation), with estimates made on the carbon sequestration potential as trees grow. Credits are issued but remain unretired until the trees have sufficiently matured.
Energy Efficiency Projects: Prior to implementing energy efficiency measures in buildings, industries, or transportation, estimates are made on the resulting reduction in carbon emissions from reduced energy usage. Credits are generated based on these anticipatory calculations but remain unretired until the actual emissions reductions are verified.
2.3. Pre-purchase Credits
Sold before issuance, pre-purchase credits promise future issuance, often associated with innovative but high-risk projects.
Examples:
Direct Air Carbon Capture and Storage (DACCS): For a DACCS project in the design or construction phase, carbon credits can be allocated based on the plant’s operational status. However, these credits are only eligible for retirement once the carbon benefits have been precisely estimated.
Carbon offsets provide diverse options for compensating for emissions. They are broadly categorized into two main groups: those centered on carbon avoidance and reductions and those focused on carbon removal.
While both carbon removal projects and carbon reduction projects aim at mitigating climate change, they operate differently.
3.1. Carbon Avoidance/Reduction
Carbon reduction offsets typically involve projects or activities aimed at preventing or reducing the emission of greenhouse gases. These initiatives offset emissions by preventing the release of CO2 in alternative locations.
Examples include:
Forest conservation projects: Activities that prevent emissions from the conversion of forests into severely forested or degraded land, such as REDD+ projects.
Clean cooking stove programs: Initiatives that reduce emissions by providing fuel-efficient cookstoves to developing nations.
Energy efficiency initiatives: Changes in industrial processes to lower emissions and the implementation of renewable energy sources.
3.2. Carbon Removal
Carbon removal projects involve removing carbon dioxide from the atmosphere and, in some cases, securely storing it in carbon sinks, often in the ground.
Examples include:
3.3. Comparing Carbon Reduction vs. Removal Offsets
Now, a brief comparison of these two offsets, focusing on four critical aspects: Net Zero Potential, Costs, Measurement, and Time & Impact.
a. Net Zero Potential
Carbon Avoidance/Reduction: Focuses on minimizing the carbon footprint of specific activities or processes but may not fully offset total emissions.
Carbon Removal: Results in a net reduction of atmospheric carbon, potentially achieving a net-zero or net-negative impact on the overall carbon balance.
b. Costs
Carbon Avoidance/Reduction: Involves upfront costs but may lead to long-term savings.
Carbon Removal: Generally more expensive to implement, with costs varying based on scale and technology.
c. Measurement
Carbon Removal: Measuring and verifying efficacy is more feasible, but scaling is challenging due to costs.
d. Time & Impact
Carbon Avoidance/Reduction: Immediate impact, such as switching to renewable energy sources.
Carbon Removal: Impact realized over a more extended period, as with tree growth or direct air capture technologies.
In summary, while carbon reduction offsets focus on minimizing emissions from specific activities, carbon removal offsets aim to draw down and store carbon from the atmosphere, potentially achieving net-zero or net-negative impact. Both types of offsets play essential roles in mitigating climate change, often used in combination to address carbon footprints and contribute to global efforts in combating climate change. Carbon reduction offsets offer a viable solution for the present due to lower costs, while removals represent a pathway for the future to make a positive impact in our fight against climate change.
4.1. Nature-Based Solutions
a) Afforestation & Reforestation (Removal)
Afforestation: Establishing forests or tree stands in areas previously devoid of forests, contributing to environmental conservation and ecosystem restoration.
Reforestation: Methodical replanting of trees in deforested or degraded areas aimed at restoring and replenishing forest ecosystems.
b) REDD+ (Reduction)
The REDD+ initiative is designed to mitigate climate change by incentivizing the preservation and sustainable management of forests.
c) Blue Carbon (Removal)
Revitalizing and protecting coastal and marine ecosystems, such as mangroves, seagrasses, and salt marshes, recognized for their significant carbon sequestration capabilities.
4.2. Tech-Based Solutions
a) Renewable Energy Sources (Reduction)
Initiatives replacing emissions from fossil fuel power plants by supplying renewable energy to the grid.
b) Improved Cookstoves (Reduction)
Implementing fuel-efficiency programs and providing developing nations with cookstoves to reduce reliance on solid fuels like wood, coal, or agricultural residues, thereby lowering emissions of smoke.
c) Carbon Capture Utilization and Storage (Reduction)
Capturing carbon dioxide (CO2) emissions from industrial processes, power plants, or other sources before release into the atmosphere. This is often stored in depleted oil fields or reservoirs to enhance oil recovery, known as enhanced oil recovery.
d) Enhanced Weathering (Removal)
A geoengineering technique accelerating the natural process of mineral weathering to capture and store carbon dioxide from the atmosphere.
e) BECCS (Removal)
A technology generating energy (biofuels, electricity, heat) from burning biomass, capturing emitted carbon dioxide, and permanently storing it underground.
f) DACCS (Removal)
An advanced technology actively removing carbon dioxide from the ambient air and storing it in geological formations.
g) Biochar (Removal)
A type of charcoal derived from heating organic matter without oxygen, used to improve soil quality and store carbon.
4.3. A brief comparison of tech-based and nature-based solutions.
a) Nature-Based
Pros:
Cost-effectiveness: Nature-based solutions often require less investment compared to high-tech solutions.
Strong Co-Benefits: Beyond carbon sequestration, these solutions promote biodiversity, improve air and water quality, and enhance soil health.
Cons:
Measurement and Verification Challenges: Accurately measuring and verifying carbon sequestration potential can be complex and prone to uncertainties.
b) Tech-Based
Pros:
Easier Measurement: Technology-driven solutions offer precise monitoring and control mechanisms, ensuring reliable emissions reduction.
High Permanence: Carbon storage underground minimizes the risk of carbon re-release into the atmosphere.
Economic Promise: Offers economic opportunities and potential high returns on investments.
Cons:
Limited Scalability: Some technologies require substantial financial commitment and differ in maturity levels, making implementation financially challenging for certain industries or regions.
Both carbon removal and avoidance projects offer valuable and varied strategies for combating climate change. Each approach comes with its own set of challenges, strengths, and limitations, rendering exclusive reliance on either imprudent. Consequently, it is imperative for every investor to meticulously evaluate the drawbacks of each project before making any investment decisions.
Beatriz Canamary is a consultant in Sustainable and Resilient Business, Doctor and Professor in Business, Civil Engineer, specialized in Mergers and Acquisitions from the Harvard Business School, and mom of triplets. Today she is dedicated to the effective application of the UN Sustainable Development Goals in Multinationals.
She is an ESG enthusiast and makes it possible to carry out sustainable projects, such as energy transition and net-zero carbon emissions. She has +15 years of expertise in large infrastructure projects.
Member of the World Economic Forum, Academy of International Business and Academy of Economics and Finance.
