Carbon credits take centre stage in race to decarbonise

Carbon prices will soon be in the spotlight with shipping set to be included in the European Union emissions trading system (ETS). 

An ETS sets a gradually decreasing cap on the amount of emissions that a sector, or group of sectors, can produce. It subsequently creates ‘carbon permits’, which companies must buy for each tonne of CO2 they emit.

The ETS is built on a decarbonising mechanism that lifts the carbon price partly by restricting the number of allowances (EUAs) that industries can purchase. These are the allowances shipping operators are expected to start snapping up from January 2022.

The European Union’s carbon market is at the heart of its strategy to slash greenhouse gas emissions. The scheme forces power plants and industry to buy permits when they emit CO2, which effectively seeks to put a price on pollution. 

It’s worth noting that by utilising MarineTraffic data, maritime stakeholders have the ability to track voyages, which allows for greater transparency in the market. 

“We will make emission trading work not only for energy generation and industry, but also for transport and for buildings,” Ursula von der Leyen, President of the European Commission, told a virtual climate change summit hosted by the U.S. government last month. 

Carbon must have its price, because nature cannot pay the price any longer.

France’s Barry Rogliano Salles (BRS) became the first shipbroker to offer emissions consulting services and carbon credits brokerage. 

“As commodity producers, traders and end users become increasingly interested in mitigating the environmental footprint of their activities, they are also likely to become more interested in offsetting emissions from the transportation of their products,” said Mats Berglund, CEO of Pacific Basin

And in April, shipbroker IFCHOR and carbon market specialist ClearBlue Markets partnered to offer carbon emissions advisory services. 

Trifon Tsentides, Director of Business Development at IFCHOR explained: “The combined strengths of a shipbroker and renowned carbon market specialist will help shipowners and charterers alike navigate their way through the complexities of carbon offsetting. From creating plans and strategies, to executing and registering trades, we are providing clients with a complete set of actionable tools to reduce their operational carbon footprint. With emissions from shipping looking likely to fall under mandatory carbon pricing regimes in the future, voluntary pledges allow emitters to build their experience of the carbon markets and make a positive difference from today.”

Shipbrokers BRS, Clarksons and Affinity (Shipping) launched carbon desks in late 2020 to enter the anticipated market.

Trafigura, meanwhile, also announced in April that they would also set up a carbon trading desk.

The first voluntary shipping carbon offset was way back in 2014 and involved the use of AkzoNobel’s International Paints biocide-free antifouling hull paint by Grimaldi Lines and Lykiardopolou, which generated carbon credits that traded at $5-$10 per tonne.

A voluntary market already exists for shipping companies who wanted to purchase carbon offset credits now. However, they will not be an alternative to buying EUAs.

Mark Carney is the UN Special Envoy for Climate Action and is keen to scale up the voluntary carbon credit markets. 

The former Bank of England governor believes they are vital instruments if countries and businesses are to meet emissions targets set under the Paris Climate Agreement.

“The financial sector can use their expertise in building market infrastructure to create a carbon offset market which connects this demand with supply,” said Carney. 

However, a recent research paper, ‘The Global Voluntary Carbon Market: Dealing With the Problem of Historic Credits’, led by Trove Research with UCL Geography, suggests a new governing body is needed to deal with old carbon credits available and set strict rules on what counts as a carbon credit. 

The report also predicts the market for carbon offsets could be worth up to $25bn (£18bn) a year by 2030, compared with just $0.4bn (£300m) today.  

Professor Simon Lewis (UCL Geography) said: “The carbon offsetting concept relies on the environmental integrity of the credits – specifically that money paid for the offsets is used to reduce emissions or capture carbon dioxide from the atmosphere.  

“But methodologies and standards for defining carbon offsets – and the rigour with which the standards are enforced – have evolved and greatly improved over time. This means that older credits may have been created under less stringent requirements but are still able to be sold in the market today. These older unclaimed credits should be retired as they cannot be considered an additional removal of greenhouse gases.” 

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