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CORSIA Carbon Credit Demand To Be 14x Larger Than Supply

The surplus of CORSIA-eligible carbon credits is projected to turn negative by 2030 unless new supplies become available, according to an analysis by Abatable.

Currently, the aviation sector contributes about 3% of global emissions. As a sector that’s difficult to decarbonize, it’s exploring direct low-carbon technological solutions like sustainable aviation fuel (SAF) and electrification. However, these solutions face cost and technological hurdles and will take time to become widespread.

The Challenge of Decarbonizing Aviation

To mitigate emissions in the meantime, the International Civil Aviation Organization (ICAO) launched the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) in 2016. CORSIA aims to offset any growth in aviation emissions above 85% of 2019 levels.

CORSIA entered its first phase in January this year, after a pilot period from 2021 to 2023. Phase 1, which runs from 2024 to 2026, is voluntary for participating states, while Phase 2 will be mandatory starting in 2027.

  • To comply, airlines can purchase SAF, enhance fleet efficiency, or buy CORSIA-eligible carbon credits.

However, the rollout has been challenging. In March, major carbon credit issuers Verra, Gold Standard, and Climate Action Reserve (CAR) were only conditionally approved by ICAO’s Technical Advisory Body. This status will be reconsidered in September following a resubmission process completed in April 2024.

Currently, CORSIA Phase 1 credits can only be acquired through the American Carbon Registry (ACR) and ART TREES standards. Additionally, CORSIA credits require Letters of Authorization from host countries, further limiting the supply.

As of now, the only recent issuance eligible for the scheme is 7.1 million Guyana ART credits. The ICAO Technical Advisory Body’s decision suggests that this limited supply situation may persist throughout 2024.

Demand to Outpace Supply by 2030

Abatable’s analysis indicates that, under current market conditions and without new supplies, demand for CORSIA credits will exceed supply by 2030. In Phase 2 of the scheme, demand is projected to outpace supply between 2029 and 2030.

In a conservative scenario, CORSIA demand does not exceed 100 million credits until after 2034. However, supply peaks in 2025 and can only meet demand until 2029. Without new projects, demand in Phase 2 could be 14x  larger than supply.

CORSIA carbon credit demand, supply, conservative scenario

In an optimistic scenario, aviation emissions return to 85% of 2019 levels this year, with CORSIA demand surpassing 100 million carbon credits in 2027. Supply, bolstered by projects likely to receive corresponding adjustments, meets demand until 2030. Without new projects, demand in Phase 2 could be 7x larger than supply.

CORSIA demand, supply, optimistic scenario

Abatable’s projections include existing projects expected to meet the Integrity Council for the Voluntary Carbon Market’s Core Carbon Principles and likely to receive corresponding adjustments. Supply from Verra, Gold Standard, and CAR is expected from 2025.

CORSIA’s design interfaces with the Paris Agreement’s Article 6, allowing countries to trade emissions reductions to meet Nationally Determined Contributions (NDCs). Corresponding adjustments ensure accurate progress toward NDCs and prevent double counting. These adjustments are required for CORSIA credits, allowing them to be transferred internationally.

However, delays in implementing Article 6 mechanisms could affect CORSIA. While details are being developed, projects receiving Letters of Authorization can list on voluntary market registries as Article 6 compliant. Biennial UN reports will confirm national accounting and the application of corresponding adjustments.

A significant challenge is the liability for the revocation of authorized credits. ICAO’s Technical Advisory Body suggests that standards or project proponents should assume liability, while standards argue it should lie with the revoking country. COP29 decisions may influence this issue, potentially causing even more delays.

Market Response and Developments

The market is reacting to these developments. New commercial structures and carbon insurance products are under conception to mitigate risks and encourage trading activity. These products aim to provide confidence to market participants and enhance liquidity, especially given the current market uncertainties.

So, what’s next for this development in CORSIA carbon credits?

Verra, Gold Standard, and CAR have re-submitted their applications, and the Technical Advisory Board will reassess these in September 2024. If they fail, new supply sources will be delayed until 2025, extending beyond current projections.

To mitigate supply issues, standards should work toward approval while also building capacity to help countries develop market infrastructure and governance for authorizing credits with corresponding adjustments. Large CORSIA participants might invest in upstream projects, although this would require market understanding and time to generate a credit stream and gain necessary adjustments.

Airlines are not required to purchase credits until Phase 1 concludes in January 2028. However, some may buy and retire credits in advance, based on projected obligations from historical emissions data. Final emissions reports and audits will be completed in 2027, indicating that the total credits needed, leading to an increase in credit retirements.

The availability of credits post-2027 will depend on decisions by ICAO, Article 6 negotiators, and governments, as well as the emergence of new supply sources. The actions taken in the interim will be crucial for ensuring there are enough carbon credits to meet future demand.

The future of the CORSIA carbon credit market hinges on increasing the supply of eligible credits. Abatable’s analysis underscores the need for new projects and corresponding adjustments to meet the rising demand by 2030. While pursuing low-carbon technologies, the aviation sector must rely on carbon offsets in the interim. 

The post CORSIA Carbon Credit Demand To Be 14x Larger Than Supply appeared first on Carbon Credits.

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2024 is The Golden Era For Europe’s Renewable Energy: Here’s Why

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2024 is The Golden Era For Europe’s Renewable Energy Here's Why

In 2024, Europe’s market for renewable power purchase agreements (PPAs) is poised for substantial growth. Moreover, major mergers and acquisitions (M&A) also happened in the region, targeting energy companies. These key developments indicate renewed investor interest in renewable energy after a slow first quarter. 

The Surge of High-Value European Green Energy Deals 

The year 2023 was the busiest and most dynamic period in Europe’s renewable energy power purchase agreement history. Yet, the market is now entering what experts dubbed its ‘Golden Era’.

Corporate buyers secured 21 TWh/year of green electricity from 10 GW of new projects in the first five months of 2024, maintaining a pace similar to 2023, according to S&P Global Commodity Insights. 

The number of deals increased to 145, compared to 94 in the same period of 2023, indicating more players entering the market. The growth was primarily driven by 10.2 TWh/year of wind PPAs in northern Europe and 7.5 TWh/year of solar PPAs, mainly in Spain.

For the same period, there were three major European M&As targeting energy companies. The largest deal involved US-based Energy Capital Partners acquiring British renewable energy firm Atlantica Sustainable Infrastructure, with a transaction value of €7.25 billion.

Energy Capital will purchase all Atlantica shares with Atlantica’s largest shareholder, Algonquin Power & Utilities, supporting the deal. The transaction is expected to close by early 2025, after which Atlantica will become privately held, delisting from public markets. 

The second-largest deal saw Canadian investor Brookfield Asset Management and co-investor Temasek proposing to acquire a majority stake in Neoen SA, an independent renewable energy producer. Neoen has about 8 GW in operation and under construction, plus 20 GW in development. 

M&A activity in Europe renewable electricity industry

After Brookfield’s Neoen bid announcement, JP Morgan analysts noted that investors appeared to be willing again to invest their money in green energy development pipelines. 

These high-value deals highlight a robust interest in renewable energy, underscoring the sector’s importance not just in Europe but in global energy strategies and investor portfolios.

Market Dynamics, Price Trends, and Regional Challenges

However, deal prices have declined due to lower electricity spot and forward prices, as S&P Global reported. 

Iberian capture prices reached record lows this spring, influenced by bearish fundamentals and increasing solar capacity. In Germany, May’s solar capture price dropped to its lowest since summer 2020, although forward contracts recovered, with the benchmark German year-ahead power contract rising almost 50% from its February lows.

Europe power prices

Spain and Italy face unique challenges. In Spain, despite strong corporate interest, volatile market conditions and high interest rates hindered PPA contracting. 

Insufficient grid capacity also posed challenges, a problem shared with Italy and Germany. In Italy, central permitting delays have slowed down project authorization, and restrictive auction systems further complicate the market.

Germany is expected to compete closely with Spain for PPA leadership in Europe. In the first five months of 2024, Germany signed 21 deals for 2 GW of capacity, focusing on utility-scale solar and offshore wind projects. 

Despite regulatory uncertainties, Germany’s large industrial base and tech sector drive PPA demand. New corporate sustainable reporting rules and mandatory datacenter requirements are additional demand drivers.

In the UK, the government-run contract for difference (CFD) auctions are highly attractive, potentially crowding out private sector deals. However, the ongoing Review of Electricity Market Arrangements (REMA) adds uncertainty, causing some market participants to pause activities.

Sectoral Shifts and New Opportunities

While Brookfield has the financial capacity for large-scale deals, few investors can match such substantial investments. Initially, oil majors were expected to be significant players in the renewable energy sector. 

However, the focus on energy security since Russia’s invasion of Ukraine has shifted their priorities. Recently, Norwegian state-owned power producer Statkraft AS completed a €1.8 billion acquisition of Spanish group Enerfín SA.

Additionally, several privately owned developers are anticipated to enter the market this year.

Market analysts project that this trend will continue as the cost for deploying renewables are falling significantly. As seen below, RMI data shows that costs drop by around 20% for every doubling of deployment.

renewable technology costs

Though tech companies remain the leading buyers of PPAs, but the consumer goods, industrial, chemicals, and utility sectors are also emerging as significant offtakers. The rise of artificial intelligence computing power creates new opportunities, with countries like the Nordics and Iberia seeing increased activity. 

Spain, in particular, is becoming a key hub for data centers due to favorable conditions like low prices, low taxes, and renewables access.

The reform of the EU’s electricity market aims to broaden access to PPAs, with government support crucial to make these PPAs financeable.

Overall, 2024 is shaping up to be a pivotal year for Europe’s green power deals, driven by increased corporate commitment to renewable energy, the same trend happening in the U.S., despite facing significant regional and market-specific challenges. 

The post 2024 is The Golden Era For Europe’s Renewable Energy: Here’s Why appeared first on Carbon Credits.

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Audi and Alfa Romeo Take The Ride to Electrification

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Audi and Alfa Romeo Took on The Ride to Electrification

Amid the rapid adoption of electrification, electric cars are reshaping the automotive industry, promising enhanced performance, efficiency, and a cleaner future. This momentum is seized by yet other big players in the vehicle industry, Audi and Alfa Romeo. Both have revealed their innovative electric car models: the 2025 Audi E-Tron GT and the Alfa Romeo Milano. 

Driving the Electrification Revolution

The electrification movement, driven by advancements in battery technology and supportive policies, underscores a pivotal shift toward sustainable transportation solutions.

According to the International Energy Agency (IEA), global electric car sales surged to nearly 14 million vehicles, with 95% of these sales occurring in China, Europe, and the United States in 2023. This marked a significant increase from previous years, totaling 3.5 million more electric cars sold compared to 2022, representing a remarkable 35% year-on-year growth. 

global EV sales 2016-2023

The total number of electric cars on the roads globally reached 40 million by the end of 2023, closely aligning with forecasts from the Global EV Outlook 2023.

The rapid adoption of electric vehicles (EVs) is underscored by the fact that in 2023, there were over 250,000 new electric car registrations per week, surpassing the entire annual total from a decade earlier in 2013. 

Furthermore, electric cars accounted for about 18% of all cars sold globally in 2023, up from 14% in 2022 and a mere 2% in 2018. This highlights the robust growth and maturation of the electric vehicle market.

This trend underscores the increasing preference for EVs, driven by battery technology advancements, expanding charging infrastructure, and supportive policies. All these aimed at reducing emissions and promoting sustainable transportation solutions.

In another report by RMI, transportation will keep pace with other sectors in electrification by 2050.

electrification in transport

Riding along this electrification trend are Audi and Alfa Romeo, which both revealed their latest EV models. 

Meet The Most Powerful Audi Ever

The 2025 Audi E-Tron GT has received a significant update following its Porsche Taycan counterpart earlier this year. Available in three variants, this electric sedan boasts enhanced power, charging speeds, and range. 

The flagship RS E-Tron GT Performance emerges as Audi’s most powerful production vehicle ever, delivering 912 horsepower and accelerating from 0 to 62 mph in just 2.5 seconds, slightly slower than the Taycan Turbo GT.

All models feature dual-motor all-wheel drive and benefit from an upgraded battery pack, now with 97.0 kWh capacity (up from 84.0 kWh), supporting a 320 kW maximum charging power. Charging from 10% to 80% takes 18 minutes under optimal conditions, providing 174 miles of range in just 10 minutes.

Introducing Alfa Romeo’s First Electric Car 

The Alfa Romeo Milano, a new small SUV under the Stellantis group, marks Alfa Romeo’s debut in electric vehicles (BEV) alongside a hybrid version. It aims to enhance sales within the expansive Stellantis portfolio, which includes Fiat, Jeep, Peugeot, and Vauxhall. 

The Milano showcases Italian design flair with a compact silhouette and distinctive features such as the ‘scudetto’ grille and advanced LED headlights. It stands 4.1m long, 1.5m tall, with short overhangs and a truncated rear reminiscent of the Sixties Giulia TZ. 

Built on the eCMP platform, it offers up to 238bhp from its electric motor and boasts a range of about 250 miles.

Alfa Romeo’s transition to electric power is crucial in reducing carbon emissions from vehicles, aligning with global efforts to mitigate environmental impact and promote sustainable transportation solutions.

How Clean is An EV vs. A Fossil Fuel Car?

A research done by the European Energy Agency suggested that EVs emit up to 30% less carbon than gas- or diesel-powered cars. Moreover, electricity sourced from clean energy or low-carbon sources further lowers the environmental impact of EVs.

Additionally, a Reuters analysis revealed that in worst case scenario (EV is charged from a coal-fired power source), an EV would release 4.1 million grams of CO2 a year. In contrast, a comparable gas car can generate over 4.6 million grams.

carbon emission of electric vehicle vs gas car

Accelerating EV Adoption in the United States

The United States saw robust growth in new electric car registrations last year, totaling 1.4 million vehicles—an increase of over 40% compared to 2022, per IEA data.

Although the year-over-year growth rate was slightly lower than in the preceding years, the demand for EVs remained strong. This is supported by revised qualifications for the Clean Vehicle Tax Credit and price reductions across popular EV models.

The updated criteria under the Inflation Reduction Act (IRA) played a pivotal role in boosting sales. Notably, the Tesla Model Y’s sales surged by 50% in 2023 after it became eligible for the full $7,500 tax credit. 

Despite initial concerns about potential bottlenecks due to stricter domestic content requirements for EV and battery manufacturing, vehicles like the Ford F-150 Lightning were able to navigate these challenges.

Looking ahead, the number of new EV models reaching the market is poised to accelerate. BloombergNEF projects that EVs could reach 45% of global passenger-vehicle sales by 2030 and 73% by 2040. 

global long-term EV sales by market 2040

These trends speak of the continued expansion of electric vehicle adoption in the US and beyond, underscoring the resilience of the EV market despite evolving regulatory landscapes and changing incentives. As the window for reaching net zero emissions in transportation is closing quickly, EVs remain the most cost-effective route to decarbonize the sector.

The post Audi and Alfa Romeo Take The Ride to Electrification appeared first on Carbon Credits.

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Overcoming sustainability challenges: practical solutions for your business

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In today’s business landscape, sustainability is more than just a buzzword—it’s a necessity. Companies face increasing pressure from clients, stakeholders, and regulators to demonstrate their commitment to environmental responsibility. As a business owner, you might be wondering where to start and how to effectively make your company more sustainable. 

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