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Your monthly update from the world of climate finance is back. |
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SBTi board allows use of carbon offsets to meet Scope 3 targets |
SBTi has decided to extend the use of carbon offsets from the voluntary carbon market and other environmental attributes for the purpose of abatement of Scope 3 related emissions beyond the current limits. |
In July, a discussion paper with a draft proposal from SBTi about potential changes to Scope 3 will be published which will feed into the standard draft that corporates use for target setting. |
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UN climate chief calls for “quantum leap in climate finance” |
UN Climate chief Simon Stiell called on the International Monetary Fund to make “more use” of an obscure pot of money called the Catastrophe Containment Relief Trust (CCRT) in his recent speech. |
The CCRT provides grants for debt relief to the world’s poorest countries when they are hit by disasters that meet a preset threshold of destruction. But the IMF’s latest annual report described the trust as “critically underfunded” with “insufficient resources to provide significant relief” when another disaster strikes. |
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Climate change threatens right to equality: Supreme Court |
India’s Supreme Court has ruled for the first time on the right to be free from the negative effects of climate change. |
In its judgement the bench said, “The right to a healthy environment encapsulates the principle that every individual has the entitlement to live in an environment that is clean, safe, and conducive to their well-being. By recognising the right to a healthy environment and the right to be free from the adverse effects of climate change, states are compelled to prioritise environmental protection and sustainable development, thereby addressing the root causes of climate change and safeguarding the wellbeing of present and future generations.” |
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Our risk-assessed project portfolio |
We now have a dedicated portfolio of curated carbon removal projects in the global south. The portal allows investors to view key details associated with these projects (IRR, payback period, price per credit, emission reduction estimates) and most excitingly, view our ex-ante risk assessments to understand if the projects match their risk profile. |
To do your own due diligence, you can also request access to project data rooms! |
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The battle between climate targets and business interests |
The battle between climate targets and business interests is intensifying as companies grapple with the practical challenges of meeting ambitious emission reduction goals while protecting corporate interests. The recent removal of several prominent companies, including Microsoft, Unilever, and JBS, from the validation process for their climate plans under SBTi underscores the complexities involved in aligning corporate strategies with global climate objectives. |
A key contention raised by companies is the lack of supportive policy frameworks from governments, which hampers their ability to swiftly enact emissions reductions. The challenges are further compounded by the complexity and cost of addressing Scope 3 emissions, which constitute a significant portion of companies’ carbon footprints. |
What may be seen as a response to corporate concerns around meeting climate targets, the SBTi board of directors recently made an announcement that marks a significant shift in its approach by expanding the use of carbon offsets to meet Scope 3 abatement targets. Until now, SBTi only allowed the use of carbon credits to offset 10% of the residual unavoidable emissions after a company has successfully met 90% of its net-zero target. |
What does this mean for the Net-Zero standard and the carbon markets? Expect demand for carbon credits to take off. According to Bloomberg, companies with SBTi targets emit 30 billion tonnes of CO2, of which a massive 27 billion tonnes come from Scope 3 emissions. Even if SBTi extends the use of environmental attribute certificates to offset 10% of all Scope 3 emissions, we are looking at a potential demand for 2.7 billion credits; far beyond what the VCM can supply in its current state. |
Even if all companies with targets do not choose to exhaust their offsetting quota (yet to be defined by SBTi), we can expect the demand addition to be substantial. With SBTi devising solutions to climate issues that do not ignore the cost-efficiency needs of businesses, more companies are likely to set ambitious Net-Zero targets, further expanding the demand pool for the VCM. |
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Carbon credit price for the past month |
Price per credit: $3.55/tCO2e (-1.9%MoM) |
Based on top 500 projects globally by volume of credits retired. |
The average cost per credit has dropped by 1.9% compared to last month’s $3.62, now standing at $3.55. Credit prices for nature-based solutions have have witnessed a fall of 4.9%, currently priced at $3.65. Premium biochar projects are still robust, with Puro credits seeing a slight uptick of 0.9% month-on-month, remaining at $172.19 per credit. |
The recent surge in CORSIA credits prices is a pivotal development. This comes along with the first large issuance of CORSIA credits by Guyana. With obligations on aviation industry players to offset emissions looming, the demand for eligible credits is intensifying. |
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There appears to be a growing consensus that abandoning the markets for environmental commodities such as the VCM might be the equivalent of turning away from an avenue with immense potential for environmental gains. With the VCM in a mature space and an ever-growing need for climate finance, businesses and standards alike are focusing on generating and procuring quality carbon credit supply. This is evident with the growth of the burgeoning market for carbon removal credits. In the coming months we expect to see action from the SBTi, carbon standards, and other watchdogs in the space. |
We’ll be back with more interesting updates next month. Team Neufin |
