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Carbon Removal Funding Raises Thorny Questions About Net-Zero Commitments
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Welcome back. The nascent carbon-removal industry has become the hottest area in climate finance. Big tech companies such as Google and Facebook, consulting firms McKinsey and BCG, and financial firms UBS and Swiss Re recently said they will spend roughly $1.5 billion between them in the years ahead paying startups to remove carbon out of the air and store it for centuries.
The money has grown the potential market for carbon removal by about 30 times, and is an acknowledgement that the world isn’t doing enough to limit global warming. It is also a sign that many companies are seeking higher-quality methods for offsetting their unavoidable emissions and struggling to find them.
Only a few startups have demonstrated they can remove carbon from the atmosphere, and their capacity is sold out years into the future because of a handful of companies that are willing to pay hundreds of dollars for each ton. While these buyers wait for startups to deliver large-scale removals, most companies seeking to offset emissions are stuck relying on far cheaper carbon credits, often linked to keeping trees standing. The benefits are hard to verify, and can be undone if the forest is hit by fire or another disaster.
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4 Steps to Make Climate Action, Resilience the Future of Health Care
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The drawbacks of traditional offsets are adding urgency for startups working on new removal methods. Peter Reinhardt, CEO of Charm Industrial, says he became interested in the field when he couldn’t find high-quality offsets for his previous company. The San Francisco company heats up farm waste such as corn stalks to produce carbon-rich “bio-oil” that can be injected underground, and is trying to build better machines to bring down costs.
Charm sells credits for about $600 a ton, roughly what is charged by Climeworks, a Swiss company running one of the only other operational carbon-removal facilities. It recently raised $650 million and is deciding where to build its next direct-air-capture plant. The one it opened last year in Iceland is capable of removing about 4,000 metric tons of carbon a year from the atmosphere. Climeworks co-CEO Jan Wurzbacher said the company is able to scale up, despite the high prices, thanks to confidence from investors and companies that its technology actually benefits the planet.
But corporate buyers say their commitments are only the first step to kickstart the industry. Government policies like a carbon tax and clear regulations will be needed to grow carbon removal into a mainstream industry with the scale to benefit the climate. “The voluntary markets can get us to first base,” said Nan Ransohoff, head of climate at Stripe, one of the companies making ambitious removal pledges. “We need policy to get us the rest of the way there.”
Click here to read our full story on carbon removal.
Also this week: Solar tariffs; offsetting standards; iPhone charging port under threat.
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Hydrogen fuel-cell company Plug Power is building a 100-megawatt plant at the Port of Antwerp-Bruges in Belgium. The building site is shown above. PHOTO: PLUG POWER INC.
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A pivot to green hydrogen. Plug Power has never turned a profit since it went public in 1999. The hydrogen fuel-cell maker is hoping that becoming a supplier of green-hydrogen fuel will change its fortunes. The Latham, N.Y.-based company said this week it plans to invest around $315 million in a new facility in Belgium that will eventually be able to churn out 12,500 tons of fuel a year. It also has plants in New York and Georgia starting up this year, with more coming in Texas and California.
Green hydrogen is made using renewable electricity—the plant in Belgium will be supplied by a nearby wind farm—to split water into oxygen and hydrogen. Hydrogen can power industrial activities such as steelmaking, but logistics companies are Plug Power’s biggest customers. It has deals to supply fuel for Walmart forklifts and Renault delivery vans.
Green-hydrogen suppliers hope to benefit from government support. The fuel is a big part of the European Union's plan to quit Russian oil and gas. In the U.S., the industry hopes to benefit from a proposed tax credit.
Biden pauses new solar tariffs. The White House said a probe into whether Chinese solar-power equipment producers are dodging tariffs won’t result in new levies for two years, a move aimed at getting stalled projects on track. The decision eases uncertainty for import-dependent solar developers and utilities, but they are still at risk from rising borrowing costs and shortages of key commodities.
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One charging port to rule them all. European Union lawmakers agreed to ban sales of electronic devices using Apple's Lightning port, saying that making USB Type-C cables the standard would prevent waste and save consumers money. The plan is a blow to Apple, which last year said it would stifle innovation. The rules would apply from 2024 if they are approved. “We can move fast when there’s a political will,” an EU official said.
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11,000 Tons
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The annual amount of electronic waste that the EU said would be prevented by a common charging standard.
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🎁 Newsletter extra: Campaign for clarity gathers pace. It isn't always clear whether a company is buying carbon credits as part of a carefully thought-out plan to help the environment, or merely as a cheap way of looking eco-friendly. The Voluntary Carbon Markets Integrity Initiative, a coalition aiming to improve standards and transparency in the murky market for carbon offsets, is developing a new code of practise.
The plan, which was announced this week and will be put out to a public consultation, sets out a three-tier hierarchy for companies making claims about their offsets. Claims would be independently verified, and the VCMI is considering options for how to do that, a spokeswoman for the group said.
🥇To get the VCMI Gold seal of approval, a company must be on track to meet its interim Scope 1, 2 and 3 emissions-reduction targets and have covered all unabated emissions by buying high-quality carbon credits.
🥈To be designated VCMI Silver, a company must be on track for its Scope 1, 2 and 3 emissions targets and offset at least 20% of its unabated emissions, a percentage that has to rise over time to retain the designation.
🥉 To achieve VCMI Bronze, companies must be on track for their Scopes 1 and 2 targets. They must be reducing their Scope 3 footprint by emissions cuts and offsets, while also offsetting at least 20% of remaining emissions.
The bronze category would exist only until 2030, putting pressure on companies to raise their ambition. VCMI also set out rules for offsetting claims made about specific products and services.
—Ed Ballard
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Cotton recycled by Recover is used by online retailer Revolve’s Lovers and Friends denim brand.
PHOTO: RECOVER TEXTILE SYSTEMS
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Goldman Sachs backs sustainable-fabric company. Recover Textile Systems, a Spanish company that sells recycled fiber for retailers such as Primark and Zara, raised $100 million in a funding round led by Goldman Sachs Group's asset-management arm. The deal valued Recover at about $1.1 billion, according to a person familiar with the deal.
As well as selling recycled cotton fiber, Recover offers a proprietary technology to provide fiber blends with color at a lower environmental cost. The company has manufacturing centers in Pakistan and Bangladesh and plans to add a second location in Bangladesh and another in Vietnam this year. Recover is aiming to produce more than 350,000 metric tons of recycled cotton fiber annually by 2026, said Samir Shah, managing director of Story3 Capital Partners, an investor in the company.
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Renewable-Energy Proposals Could Boost Rio Tinto's Environmental Profile
Rio Tinto has called for proposals to develop wind and solar power projects in Australia's northeastern state of Queensland, a move that could boost the mining giant's environmental credentials. The development of large-scale projects that the company said it seeks to support would supply clean energy to the region's grid. This would then power, in turn, its aluminum mining assets, potentially improving the company's energy management and reducing its greenhouse-gas emissions, two categories that the Sustainability Accounting Standards Board considers financially material for metals-and-mining firms. The call for proposals comes against the backdrop of new targets that Rio Tinto announced in late 2021, which
aim to reduce emissions under its operational control by 50% by 2030 from a 2018 baseline, committing $7.5 billion of investment toward achieving the goal.
This is a sample of exclusive analysis of sustainability news from the Journal’s environment, social and governance (ESG) research analysts, whose work is primarily published by Dow Jones Newswires to help institutional investors and wealth managers integrate ESG factors into portfolio models, risk management programs and financial advice. The commentary by our research analysts is independent of the news coverage by reporters at the Journal. For more information about Dow Jones Newswires, click here.
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European lawmakers unexpectedly rejected a proposal to upgrade the European Union's carbon market, casting doubt over the bloc's broader climate policy. (Euractiv)
The rush to build gas infrastructure to replace Russian supplies will either lead to irreversible global warming or create stranded assets, according to a new analysis. (Climate Action Tracker)
The U.K.'s advertising watchdog rebuked the supermarket chain Tesco for failing to show that its plant-protein-based foods were better for the environment than meat. (Financial Times)
Fast-fashion giant Shein set aside $50 million to address the ecological and social problems caused by the clothing trade. Skeptics accused the company of greenwashing; others said acknowledging that it is part of the problem was a significant step. (Guardian)
India's biggest dairy group urged the country's government to delay a planned ban on plastic straws, saying the move will hit farmers and milk consumption. (Reuters)
Volvo Trucks is spreading its bets on the future of trucking, investing in batteries, hydrogen fuel cells and combustion engines that burn sustainable fuels. (Bloomberg)
China could stop exporting crucial rare-earth metals in the next decade to supply its own needs, a researcher warned. (Mining.com)
A noxious new pollutant was discovered on the beaches of the Canary Islands: plastitar, or tar mixed with microplastics. (Wired)
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