Carbon credits: addressing the trust deficit

The reality for many companies in hard-to-abate sectors is that structural or economic impediments will make major reductions in emissions a challenge, at least in the near-term.

The market for carbon credits provides a mechanism for companies to contribute positively. It allows them to offset their emissions by buying carbon credits certified either as reducing/avoiding emissions (i.e., from processes that avoid emissions) or removing carbon (i.e., from afforestation, or carbon capture and storage).

It’s hard to overstate the potential importance of the carbon-credit market. It’s estimated it could support up to 30% of climate change mitigation to achieve a below-2°C pathway by 2030.1

But while the carbon-credit market has been around for some time, the issue for many aspiring buyers is one of trust: How do they know they’re buying credits generated by genuinely impactful projects?

The desire to avoid ‘green-washing’ charges can be another barrier. Singapore-based Climate Impact X (CIX) is one entity seeking to address this trust deficit by providing a platform of high-quality, high-impact projects for buyers and sellers. It’s verified to international standards, including consideration of carbon attributes, biodiversity, social impact and project risk management.

By addressing trust and transparency, CIX is helping to improve acceptance and drive adoption of carbon credits as one tool for industrial decarbonisation.

Alternative proteins: eating into the meat market

The extent to which food is a driver of global carbon emissions is often underappreciated. The global food system is estimated to account for 34% of global emissions today.

Of this, around half is attributable to today’s system of largely meat-based protein production, which exceeds total US emissions from all other sectors.2

Livestock production creates other sustainability issues by increasing pressure on land and water usage, which can contribute to resource scarcity and broader food insecurity.

Different protein sources — plant-based, microbial-based and edible-insect-based proteins — offer an increasingly viable and eco-friendly alternative solution.

Although a relatively nascent market representing some 1% of the overall protein market, global alternative protein sales are predicted to reach $17.9 billion by 2025. The long-term potential is even greater. By some projections, sales could hit $1.1 trillion by 2040 — displacing up to 60% of the total meat market.3

In this respect, it’s important to recognise that demand for plant-based proteins derives not just from consumer preferences, but increasingly from changing consumer health choices.

Singapore-based food and gateway services provider SATS is working with a range of alternative protein brands and start-ups, with the aim of increasing take-up of alternative protein.

It's still early days, but to achieve this goal,  SATS is leveraging its experience in food services across its businesses, including in production, food safety and global distribution networks.

These are exciting developments for investors. Mitigating climate risk and reducing resource dependency while contributing to food security are strong drivers for adoption of alternative proteins.

Opportunities in this segment include entities that specialise in the scientific/technological aspects, such as those pioneering microbial-based proteins and ‘fourth-generation’ lab-grown meat.

However, more immediate opportunities will likely present themselves in food companies developing or distributing alternative proteins that are tasty, desirable and cost-competitive.

Cost is a key factor and currently a barrier to wider adoption of alternative proteins. Nonetheless, costs are falling as adoption grows — pointing to the important role that commercial scale food companies https://prd-cdn.aberdeenstandard.nethttps://prd-cdn.aberdeenstandard.net/distributors can and will play.

Steelmaking: multi-pronged approaches to decarbonisation

Steelmaking is carbon-intensive. The nearly two billion tonnes of steel produced every year generate around 8% of global carbon emissions.

As suppliers of the raw materials for steelmaking, natural resources companies such as Australia’s BHP Billiton keep track of industry developments closely.

BHP’s Chief Commercial Officer, Vandita Pant, offered insights into how BHP partners steelmakers to explore new technologies to reduce carbon emissions. Examples include injection of hydrogen or oxygen to reduce the carbon footprint, and hydrogen-based ‘direct-reduced iron’ processes.

However, one key takeaway is the likely absence of a single ‘silver-bullet’ solution for reducing carbon emissions. This highlights the need to pursue multi-pronged approaches to find sustainable opportunities.

One example cited at the summit was BHP’s use of blockchain technology to trace copper from its Chilean mines to the point of customer delivery. BHP has also leveraged its carbon-offsetting capabilities to fund its first fully carbon-neutral copper transaction between the same companies.

This article is based on the abrdn Sustainability Summit session ‘Innovative solutions for a sustainable future’. David Smith was the moderator, along with panelists Mikkel Larson, CEO of Climate Impact X; Spencer Low, CEO of Travel and Retail, Chief Strategy & Sustainability Officer of SATS, and Vandita Pant, Chief Commercial Officer, BHP.

 

1 Natural climate solutions, Griscom et al. 2017, PNAS
2 Crippa et al. (2021)
3 FAIRR (2020). https://www.fairr.org/sustainable-proteins/food-tech-spotlight/building-esg-into-food-tech/