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Your monthly update from the world of climate finance is back. |
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All eyes on Carbon Dioxide Removals |
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What’s happening: The carbon dioxide removal (CDR) landscape is witnessing significant activity. The White House recently announced new principles for high-integrity voluntary carbon markets, emphasising innovation in CDR technologies. The Biden-Harris Administration is investing heavily in programs like the Carbon Negative Shot pilot program, which provides $100 million for small-scale CDR projects. Additionally, the Regional Direct Air Capture Hubs program is channelling up to $3.5 billion from the Bipartisan Infrastructure Law into large-scale demonstration projects. In parallel, the EU has reached a provisional deal on the world’s first carbon removal certification framework, and Japan’s GX-ETS will accept international removal voluntary credits for compliance. |
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What’s the background: In 2023, global CO2 emissions totaled approximately 37 billion metric tons. To simply prevent CO2 levels from rising, we would need to remove this amount annually, requiring an estimated 764 Gigawatts (GW) of power. Considering a nuclear power plant produces around 1 GW, this translates to the energy output of over 1,000 nuclear power plants when accounting for inefficiencies in the direct air capture process. To meet the Paris Agreement’s 1.5°C target, 7-9 billion tons of CO2 must be removed from the atmosphere annually by mid-century. This was underscored in the second State of Carbon Dioxide Removal report by over 50 international experts, led by Oxford University and the MCC. Currently, only 2 billion tons are being removed each year, predominantly through traditional methods like tree planting. |
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What demands attention: Novel CDR methods, such as biochar, enhanced rock weathering, DACCS, and BECCS, account for a mere 1.3 million tons annually—less than 0.1% of the total. Permanently effective methods contribute just 0.6 million tons, or 0.05% of the total. Despite a surge in research, public interest, and startup activity, CDR development is showing signs of slowing. As Oliver Geden from SWP suggests, a diversified CDR approach is crucial for robust climate strategy. |
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Our take: Carbon Dioxide Removals are the future of climate action and we need to step up climate finance commitments to scale this nascent industry. The current pace of CDR development is insufficient to meet global climate goals. Investing in a wide array of CDR technologies is essential for scaling up efforts effectively and sustainably. It’s imperative to accelerate innovation and deployment to ensure we can meet the ambitious targets set by the Paris Agreement and safeguard our planet’s future. |
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Learnings from the BEE Stakeholder Consultation |
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Neufin was privileged to part of the Bureau of Energy Efficiency (BEE) Stakeholder Consultation Workshop on the Offset Mechanism of the Indian Carbon Market (ICM) in Mumbai held on 29th May. The implementation of the first phase of the carbon markets in India (both Compliance and Voluntary) is on track for April 2025. BEE was extremely receptive to participant feedback, displayed a very pragmatic approach to the design of the domestic carbon market and seems to be adopting a solution-oriented design that does not fall victim to the pitfalls of our energy trading scheme - PAT. The design of the ICM is broadly in line with what Neufin has written in our working paper on the ICM last year. The first phase of the compliance market expected to have sectors including Aluminium, Cement, Fertilisers, and Iron and Steel – with each being assigned an intensity based cap. Methodologies and project types that will be a part of the voluntary (offset) scheme are currently being worked upon and will be communicated in a few months. Neufin is tracking developments on the ICM closely and will include any updates in future newsletters. |
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The White House released Principles for Responsible Participation in VCM |
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The US government released its guidelines on responsible participation in the Voluntary Carbon Market (VCM). This move will help elevate integrity, transparency, and real climate action in the VCM. The announcement brought forward 7 principles set by the US government to bolster confidence in the VCM and drive real, verifiable decarbonisation efforts. |
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India’s renewable energy goal needs investment of $190bn-$215bn by 2030: Moody’s |
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India's target of 500 Gigawatts (GW) of renewable energy capacity by 2030 will require $190 billion-$215 billion of investment over the next seven years, while another $150 billion-$170 billion of investment will be required for electricity transmission and distribution as well as energy storage, according to estimates from ratings agency Moody's. India will have to add about 50 GW of renewable energy capacity annually over the next five years, beginning 2024, to meet the country ambitious clear energy target. So far, India’s best performance has been 15 GW a year. |
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At Bonn, talks hit climate finance roadblock ahead of Baku Summit |
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Half way through the two-week Bonn Climate Change Meeting, observers said there has been no progress on talks to define a new collective quantified goal (NCQG), which is expected to define the contours of discussion at the next UN climate conference, COP29, at Baku, Azerbaijan. The US has repeated its stance on how contributing to the new fund, meant to replace the existing goal of $100 billion per year, should be voluntary. |
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Our revamped ex-ante Risk Assessment Framework |
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We are happy to share that our Risk Assessment Framework is now out of alpha! Neufin’s Investment Grade Evaluation empowers investors to swiftly and accurately screen investment opportunities, ensuring you can make informed decisions with confidence. |
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Our framework evaluates the point-in-time investment viability of carbon projects, helping investors assess both potential financial returns and environmental impact. By providing a standardised evaluation, we streamline your investment process, saving you valuable time and resources. |
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With our Investment Grade ranging from AAA (lowest risk) to D (highest risk), you can easily determine the investment worthiness of each project. Our comprehensive analysis considers critical risk parameters including financial, country, environmental, execution, and social risks. This holistic approach ensures a thorough understanding of potential returns, geopolitical and regulatory impacts, sustainability, implementation feasibility, and alignment with the SDGs. |
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Carbon credit price for the past month |
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Price per credit: $3.38/tCO2e (4%MoM) |
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Based on top 500 projects globally by volume of credits retired. |
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The average price per credit has seen a slight increase, going up from last month's $3.25 to $3.38. Nature-based solutions are now priced at $3.42 per credit, seeing an increase of 8.57% month on month. Household devices increased by 8.98% compared to last month, currently at $4.61 per credit. Puro biochar projects witnessed a slight decrease of 1.58%, now priced at $130.01 per credit. |
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Climate Group RE100 India Conclave, Mumbai |
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Conference on Compressed Biogas in India, New Delhi |
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We’ll be back with more interesting updates next month. Team Neufin |
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