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March 24, 2023
Carbon markets need to get their groove back
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Voluntary carbon markets are still navigating through a thicket of
reputational issues. | Debra Kahn/POLITICO
OFFSETS ON DEFENSE — The world’s failure to get climate change under
control and a call from the UN to do “everything, everywhere, all at
once” would seem to be good news for those who are in the business of
selling emissions reductions.
We’re in an “and world,” as Barbara Harrison, vice president for
offsets and emerging at Chevron New Energies, put it at this week’s
North American Carbon World conference in Los Angeles.
So why do voluntary carbon markets — in which companies can purchase
emissions reductions to augment their own efforts — feel so gloomy?
They’re cowering under a drumbeat of negative coverage and attacks
from the left.
A shattering Guardian article from January finding that Verra, the
main third-party verifier of offset projects, might be overstating
forestry projects’ benefits by a huge amount cast a long shadow over
the conference. Wednesday alone brought a new investigation from Die
Zeit and a letter from environmental justice groups to EU regulators
calling for them to eschew offsets.
Carbon marketers say they’re just fighting the good fight.
“We can’t let these Chicken Little critics impede action on climate
change,” said Craig Ebert, president of the Climate Action Reserve,
the offset project registry that put on the conference. “They are
letting perfect be the enemy of the good.”
The slings and arrows (along with macroeconomic trends like inflation
and reduced energy consumption) are having an impact. The voluntary
market was nearly flat last year, in part due to “fears of
reputational risk from purchasing low-quality credits,” BloombergNEF
finds. Still, it projects the market could reach $1 trillion by 2037,
driven by corporate net-zero goals.
Offsets’ perceived weaknesses are a business opportunity in
themselves. Startups like Pachama, which uses satellites to
continuously update estimates of forests’ carbon content, and BeZero
Carbon, which gives offset projects bond ratings, are capitalizing on
the murkiness.
And tech companies are muscling in with attempts to position carbon
removals as an alternative to conventional offsets. “We know how sort
of broken the legacy carbon markets are, and we know that we don’t
really just want to add higher-quality removals to this kind of broken
structure,” Steve Davis, head of climate science at Watershed, a
corporate carbon accounting platform that also sells carbon removal,
said earlier this week. Ouch.
Market participants are trying to figure out how to take back the
narrative. Upcoming standards from the Integrity Council for the
Voluntary Carbon Market, another third-party group, might help, or
might cause more controversy.
“We need to feel more confident. We are a very defensive-posture
marketplace,” said Keegan Eisenstadt, director for global nature-based
solutions at South Pole, an offset project financier (which got its
own damning investigation on Thursday from Bloomberg).
“We need to say, ‘No, no, no, we are doing good work here, we’re
trying to save the planet,” he said to applause. “We need to be a
little more bold and self-assured.”
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WASHINGTON WATCH
POWER OF THE PURSE
— An upcoming procurement rule from the Biden administration could
send a low-carbon market signal that reverberates globally, Jean
Chemnick reports for POLITICO’s E&E News.
In May, the administration plans to release a proposal to ensure
agencies’ major purchases “minimize the risk of climate change” and
require agencies to consider the social cost of greenhouse gas
emissions in major procurement decisions, according to the
administration’s regulatory agenda.
That’s on top of an existing proposal to require contractors that
receive at least $7.5 million from the federal government to inventory
and disclose greenhouse gas emissions from their own operations and
from the energy they use — known as Scope 1 and 2 emissions.
Republicans are pushing back, but implementation is already underway.
The General Services Administration, which is the nation’s largest
real estate entity and a clearinghouse for federal contracts, is
already giving information technology contractors a leg up on
contracts when they voluntarily disclose their carbon emissions and
those of their suppliers on their own or a third-party website.
“When you consider the purchasing power of the federal government, it
has the potential to radically shape supply chains globally,” said
Nicole Darnall, a professor at Arizona State University and the
director of the Sustainable Purchasing Research Initiative. “While the
primary source of those contracts is going to be a U.S. company,
they’re sourcing their product inputs from all over the world.”
SUPPLY CHAINS
BEEP BEEP — Get ready
for a lot of stories about electric vehicle incentives. The Biden
administration is planning to release proposed guidance for
electric-vehicle domestic sourcing requirements to qualify for the
Inflation Reduction Act‘s clean energy incentives next week, Kelsey
Tamborrino reports.
The automotive sector
and U.S. allies have been hotly awaiting the battery-sourcing
requirements for months, as Hannah Northey and Timothy Cama report for
E&E News. We’ll see if the guidance defuses any tension that’s been
building: either between the U.S. and the European Union, which wants
to ensure critical minerals mined or processed in the EU are eligible
for IRA incentives, or between Biden and Sen. Joe Manchin (D-W.Va.),
who’s been upset by the delay.
Analysts will be
watching how the guidance deals with “foreign entities of concern,”
which could hurt, for example, Ford Motor Co.'s plans to build a $3.5
billion battery factory in Michigan while licensing technology from
China-based Contemporary Amperex Technology Co. Ltd. E&E News’ David
Iaconangelo details more potential issues here.
YOU TELL US
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WHAT WE'RE CLICKING
— The
financial fragility underlying recent bank collapses reflects
serious lapses in corporate governance, a
Financial Times columnist suggests.
— The Washington Post has a look at what it calls the dark side of the
push for a zero-emissions economy: the abandonment of communities that
relied on old-school manufacturing.
— Not all teens are spending all of their time on TikTok. A group of
young Montanans is suing their state over its support for fossil
fuels, the
New York Times reports.
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