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Current Climate: Trying To Wring Greenwashing Out Of The Carbon Market

Plus: Edinburgh bans ads for airlines and SUVs; the outlook for investing in clean energy

This week’s Current Climate, which every Monday brings you the latest news about the business of sustainability. Sign up to get it in your inbox every week.

For years companies have trumpeted efforts to be carbon-neutral, often relying on so-called offsets purchased from large-scale renewable power projects or organizations planting trees rather than fundamentally changing how they operate. But a lack of official oversight has led to accusations such efforts are typically little more than corporate greenwashing and ineffective. To address this, the Treasury Department rolled out guidelines for a voluntary carbon market aimed at ensuring credits purchased are tied to actual climate-enhancing actions. They’ll “help us counter glossy greenwash and other real risks in a nascent and voluntary market,” said Ali Zaidi, President Biden’s national climate advisor.

As envisioned, each credit bought and sold by companies, governments and other entities will equal a ton of carbon dioxide reduced or eliminated. The market could be a major new source of income for farmers, ranchers and small businesses, as well as providers of clean power, forest projects and startups perfecting techniques to directly pull carbon from the air, oceans and soil. (The Energy Department this week awarded grants to dozens of startups with promising technologies to do exactly that.)

The Biden Administration argues that to create a carbon-neutral U.S. economy by 2050, a voluntary carbon market can help “mobilize enormous amounts of private capital,” according to John Podesta, the White House senior advisor for international climate policy.

Treasury’s guidance is a series of common-sense proposals (“carbon credits and the activities that generate them should meet credible atmospheric integrity standards and represent real decarbonization”; “credit-generating activities should avoid environmental and social harm,” etc.). But since this is a voluntary market, there are no firm regulations or enforcement steps to keep buyers and sellers honest. A large-scale carbon market could certainly generate billions of dollars to accelerate clean energy, carbon capture projects and sustainable farming techniques but whether it actually slows the rapid increase in planet-warming emissions won’t be clear for years.


The Big Read

Edinburgh Bans Ads For Airlines, SUVs And Other High Carbon Emitters

Scotland’s capital city has banned ads for airlines, SUVs, cruise lines and gas companies in what campaigners call a historic step in tackling climate change. Edinburgh’s city council announced last week that it had moved to exclude all advertisements and sponsorships for high-carbon products and services that “undermine the council’s commitment to tackling the climate emergency.”

Edinburgh’s ban follows a similar one by Amsterdam, which in 2020 became the first major city to ban ads for fossil fuels and air travel. The U.K. cities of Cambridge, Liverpool and Norwich have also passed climate-related advertising bans.

“Where national action has been slow or non-existent, cities are once again showing climate leadership from below by aligning policies on advertising with their health and climate commitments,” said Andrew Simms, cofounder of the U.K.’s Badvertising group, which campaigns against ads that promote polluting companies.

Read more here


Hot Topic

Hans Kobler, founder of Energy Impact Partners, a $4 billion venture fund, on the outlook for clean power investing

Is there a pullback in money flowing into clean energy after several failures for electric vehicle and battery startups that went public via SPAC listings?

Our sector tends to get very, very enthusiastic when things are good; people get too excited. When things are bad, people get too depressed. Our research team tracks the climate performance sector in the public markets. At the peak, it was outperforming a bullish Nasdaq by a factor of two and a half. That was fueled by these SPAC stories to a high degree. Today, it's below the Nasdaq, which makes no sense because the amount of capital flowing into our sector is so vast that it's a bigger growth rate than for the average Nasdaq company. I think the pendulum swung too far, and it may still go down a little bit before it corrects.

From an investment perspective, we're pretty excited right now. It feels like 2002 or 2003 in the tech world after the Nasdaq bubble burst. We had $1.8 trillion flowing into energy transition last year. It’s almost twice as much as traditional energy. So the money is pouring in. Our sector had flat electricity demand for almost 20 years. Right now we are supply-constrained. We could probably grow 3X, so all the lights are green. The public and the investor reaction is just a little bit too extreme so that means you have a buying opportunity.

Are you adjusting your investment strategy given the uncertain outcome of the upcoming U.S. election?

The conventional wisdom is that politics in either direction won't change so much what is happening. The reason for that is most investment actually goes into the red states, and not only the red but the swing states. So that's one big push. Secondly, the Inflation Reduction Act, if you take it away, that's the equivalent of a tax increase, which has historically not been very favored by the Republican side. Thirdly, both sides agree on job creation. So those are three very positive themes. Both sides also, I think, in principle agree on gaining more independence from China.

Are those views you share?

That's the conventional wisdom, but Trump is not necessarily a conventional candidate and may take unconventional measures. The overall narrative may change a little bit to maybe more negative. We’ve had a very positive narrative around clean electrons, net zero, yadda, yadda, yadda. Maybe it changes to things like “the windmills kill birds.”That generally has a negative impact on the investment environment. But putting that all aside, we go back to the fundamentals of what is happening. And that is the $1.8 trillion that I mentioned – and the commitment of companies.

When we launched the company, before the Paris Accord, there were only a handful of companies that had some sort of a net-zero goal. When we launched our second flagship fund in 2019, there were 80 companies. When we launched the third one last year, there were 3,000 companies that had a net-zero goal. So the momentum of companies that are committing in some way or another to a climate focus is radically accelerating. And they're doing that because it's good business. It’s their shareholders, their customers, their employees and their children that demand they do something. It's the regulators that will make it harder and harder in Europe and the U.S. to not do something.


What Else We’re Reading

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Little to no ethanol will qualify for U.S. aviation fuel credit

How a natural gas-powered bitcoin miner became a darling of climate tech

Charging ‘trees’ could solve cities’ biggest electric car problem



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