WEBVTT 1 00:00:00.520 --> 00:00:07.519 You're listening to Redefining Energy. Your co hosts from Berlin Gerard Raid and from 2 00:00:07.599 --> 00:00:13.960 London Lawrence Seglent. Today on Realief an Energy r We're going to talk about 3 00:00:13.960 --> 00:00:18.920 a market which is half the size of the tungusk In market and yet as 4 00:00:19.039 --> 00:00:23.559 a politician and media all over it. Which one is it? Second hand 5 00:00:23.600 --> 00:00:30.719 cars? No? Okay, thank you? Another guess carbon, my friend, 6 00:00:30.760 --> 00:00:34.920 but voluntary car? Voluntary carbon? Right? Yeah, but first of 7 00:00:34.920 --> 00:00:38.920 the world from our new partner. This podcast is powered by AXPO, and 8 00:00:39.079 --> 00:00:44.799 international leader in providing sustainable energy solutions for the future in an Ordix. AXPO 9 00:00:44.880 --> 00:00:48.960 has been a pioneer within trading and origination services for the last twenty years. 10 00:00:49.280 --> 00:00:54.280 People are get very passionate despite the fact that it represents less than zero point 11 00:00:54.359 --> 00:00:59.479 one percent of all investments in the energy transition. It covers less than zero 12 00:00:59.679 --> 00:01:03.439 point zero one percent of the world a mission. Now everybody seems to have 13 00:01:03.480 --> 00:01:07.879 an opinion on it. The banks are writing reports on it, the regulators 14 00:01:07.920 --> 00:01:14.239 are getting very agitated about it. Wow, that's an extraordinary non market. 15 00:01:14.719 --> 00:01:18.159 Yeah yeah, And I think it's a very controversial market and I'm really looking 16 00:01:18.200 --> 00:01:22.719 forward to discussion on my friend yeah, because we have entitled the episode is 17 00:01:22.799 --> 00:01:26.560 carbon the New Crypto, Because there's been a lot of fraud. There's been 18 00:01:26.599 --> 00:01:30.359 a lot of reports. I don't know how credible they are that more than 19 00:01:30.439 --> 00:01:36.719 fifty percent of the credits circulating are the fake or updated. And you always 20 00:01:36.719 --> 00:01:41.680 wonder if junk credits are a bug or a feature of the voluntary cabin market. 21 00:01:41.959 --> 00:01:44.840 You're absolutely right. Well, what's clear is they're not perfect. No, 22 00:01:44.840 --> 00:01:47.480 no, they're not perfect. And at the same time you've got five 23 00:01:47.480 --> 00:01:51.760 thousand blue chief companies. Is they want to be in that zero carbon neutral 24 00:01:51.840 --> 00:01:57.400 and some are using those carbon credits to support their claims. Yeah, and 25 00:01:57.439 --> 00:02:00.879 some of them around are trying to do the best, but just are misguided, 26 00:02:00.959 --> 00:02:04.359 if I may say. And at the same time, because of bad 27 00:02:04.359 --> 00:02:07.319 press, we see that some of the early movers, whether it's a line 28 00:02:07.360 --> 00:02:13.240 companies or an essay or Gucci, are now exiting the market. So it's 29 00:02:13.319 --> 00:02:16.680 never a good sign that the pioneers leave the market. It's never arch but 30 00:02:16.759 --> 00:02:21.039 it's not looking forward to the discussion. So we should bring on our guests. 31 00:02:21.039 --> 00:02:23.319 Our guest. This guide on our which I've loomed for twenty years, 32 00:02:24.120 --> 00:02:29.039 is being an expert on on to the markets. It was at the beginning 33 00:02:29.080 --> 00:02:32.560 of Bloomberg and energy finance and now is the CEO founder of trov Research, 34 00:02:32.800 --> 00:02:37.759 which is one of the best, if not the best specialists that are analytics 35 00:02:37.879 --> 00:02:43.240 firm focusing on corporate climate commitment and the global carbon market. Let's bring them 36 00:02:43.240 --> 00:02:46.879 on. Guy, welcome to the show. Lovely to be here. Thanks 37 00:02:46.919 --> 00:02:50.840 for inviting me. Yeah, it's good to see against pill while definitely good 38 00:02:50.840 --> 00:02:53.879 to see you both. So we're going to talk about carbon carbon credits today. 39 00:02:54.120 --> 00:02:59.560 We did one episode last year with a nette from i CBCM, very 40 00:02:59.599 --> 00:03:04.159 popular or we thought it was time to revisit. There are a lot of 41 00:03:04.199 --> 00:03:07.439 talk about carbon markets. Of course you've got a confounds market. We're going 42 00:03:07.520 --> 00:03:10.919 to talk about the voluntary carbon market today. So my first question is who's 43 00:03:10.960 --> 00:03:16.960 buying those carbon credits and why? Well, all roads in the voluntary carbon 44 00:03:17.120 --> 00:03:23.199 market lead to the door of the corporates. It's the intention of corporates. 45 00:03:23.240 --> 00:03:28.919 They can be large, they can be small, they can be medium sized 46 00:03:29.240 --> 00:03:36.520 who are voluntarily trying to reduce their impact on their climate. They have looked 47 00:03:36.560 --> 00:03:43.400 at doing it internally and many companies have set very ambitious climate targets net zero, 48 00:03:44.240 --> 00:03:46.120 and the conclusion that they often come to is this is going to be 49 00:03:46.159 --> 00:03:52.680 really very expensive, and if they can achieve some of those aims by buying 50 00:03:52.719 --> 00:03:57.639 a credit or effectively paying somebody else somewhere in the world to take carbon out 51 00:03:57.639 --> 00:04:01.240 of the atmosphere or reduce it going into the atmosp much more cheaply, then 52 00:04:01.599 --> 00:04:05.439 that seems like a good trade. And that's what they've been doing. And 53 00:04:05.479 --> 00:04:11.520 I understand it's so linked to the product they're gonna sell, So I don't 54 00:04:11.520 --> 00:04:15.639 really care if Gucci is carbon neutral. When I buy a Gucci bag, 55 00:04:15.360 --> 00:04:20.519 I probably don't really trust all those airlines companies who explain me that the flight 56 00:04:20.639 --> 00:04:25.720 is carbon neutral. On the other hand, you see oil companies who are 57 00:04:25.839 --> 00:04:29.279 really the big emitters, and I really wonder if they buy carbon credits are 58 00:04:29.279 --> 00:04:32.199 not. So can you grade a bit the level of commitment that those people 59 00:04:32.240 --> 00:04:36.560 are doing and the amount of carbon credits they are buying before we go into 60 00:04:36.639 --> 00:04:42.319 what is a carbon credit. I don't personally buy Gucci handbags, but if 61 00:04:42.360 --> 00:04:46.279 I did, I actually might quite like the fact that the brand is associated 62 00:04:46.319 --> 00:04:50.439 with something good then not just luxury goods, but it could be a bottle 63 00:04:50.480 --> 00:04:55.480 of wine. It could be a flight, it could be something else. 64 00:04:55.879 --> 00:05:00.000 And well, you see is that some companies attach the carbon credits to individ 65 00:05:00.000 --> 00:05:03.319 double products. So unilevera might look at say the Men's care arrange and the 66 00:05:03.439 --> 00:05:05.560 Dove soaps and they may say, well, we really want to sort of 67 00:05:05.600 --> 00:05:10.160 attach a carbon neutral brand to that because we think it's a good sort of 68 00:05:10.199 --> 00:05:13.360 marketing image. All they can do it at the corporate level, and it 69 00:05:13.399 --> 00:05:15.560 doesn't work so well for big companies because they're you know, if you're oil 70 00:05:15.600 --> 00:05:19.399 and gas or minerals, like an extractive company, because the carbon face is 71 00:05:19.480 --> 00:05:24.040 just so big, you cannot off so at at all of that in one 72 00:05:24.160 --> 00:05:27.800 failed swoop. But for medium sized companies, you know, if you're a 73 00:05:27.879 --> 00:05:31.600 bank or a management consultant or an accounting firm, now your carbon footmanent isn't 74 00:05:31.600 --> 00:05:38.279 that big, and you can take the whole company's carbon neutral admissions and offset 75 00:05:38.360 --> 00:05:41.120 those, and they like to do that as part of their branding. It 76 00:05:41.160 --> 00:05:44.879 shows their good corporate citizens. It talks to the consumers, it talks to 77 00:05:44.920 --> 00:05:48.079 other NGOs and stakeholders. Also, it also talks to investors. So a 78 00:05:48.120 --> 00:05:55.079 lot of the driver for companies climate activity now is coming from investor groups, 79 00:05:55.759 --> 00:06:00.000 trillions of dollars of fund managers now looking at corporates and saying, we're carrying 80 00:06:00.000 --> 00:06:03.279 a liability in the long term here because climate is a sort of as a 81 00:06:03.360 --> 00:06:08.120 systemic risk to every business we've got, but also in the short term, 82 00:06:08.120 --> 00:06:12.199 we want to see you doing your bit, taking action, showing that you're 83 00:06:12.319 --> 00:06:15.480 conscious of this risk and this decision and the problem the world faces. And 84 00:06:15.639 --> 00:06:19.160 carbon credits are part of the way of answering that question, Guy, can 85 00:06:19.199 --> 00:06:24.480 I ask practical questions I have? Next week? I have my own business. 86 00:06:24.680 --> 00:06:28.560 I'm a meeting with our sustainability officer and the reason we have is because 87 00:06:28.680 --> 00:06:32.480 what we're doing is we're offsetting our carbon and she's not happy about the way 88 00:06:32.519 --> 00:06:35.759 we're doing it because she says it's just not high enough quality. So what 89 00:06:35.800 --> 00:06:39.959 should I do? Oh, that's a very interesting question because we're having the 90 00:06:40.000 --> 00:06:46.319 same conversations with Introve. We are just publishing our values because we've lived both 91 00:06:46.319 --> 00:06:49.040 and we haven't written them down so far, and they will be on our 92 00:06:49.079 --> 00:06:53.639 website soon. But one of them is we practice what we preach. We 93 00:06:53.759 --> 00:06:57.319 try not to preach. We try and provide information but there's a philosophy there 94 00:06:57.319 --> 00:06:59.959 that is, you know, we can't espouse the virtues of climate action if 95 00:07:00.000 --> 00:07:02.199 we don't do it ourselves. So we're actually going down that same journey and 96 00:07:02.279 --> 00:07:05.720 thinking about our calculating our carbon footprint. And you know, I'm conscious I 97 00:07:05.759 --> 00:07:10.680 fly to conferences and I feel very guilty about it. I want to compensate 98 00:07:10.720 --> 00:07:14.360 for that. And it's actually a really interesting question, Okay, what credits 99 00:07:14.360 --> 00:07:16.920 would we buy as a company who's like in the center of this market, 100 00:07:17.360 --> 00:07:20.519 And it really just sort of boils down to what matters to you as an 101 00:07:20.560 --> 00:07:25.439 organization. Sometimes it might be the counterparty you're dealing with. Do you trust 102 00:07:25.439 --> 00:07:28.319 them? Do you know what they're doing on the ground. We do have 103 00:07:28.480 --> 00:07:31.759 analysis of individual projects across four and a half thousand projects that try and sort 104 00:07:31.800 --> 00:07:35.439 of help those decisions that you're making. But sometimes you may think, you 105 00:07:35.439 --> 00:07:39.279 know, I really want to protect nature as part of my solution. I 106 00:07:39.360 --> 00:07:41.800 want to not just protect it, I want to enhance it. So you 107 00:07:41.839 --> 00:07:45.680 know, you might go to an aforestation or reforestation project. You might think 108 00:07:45.680 --> 00:07:49.959 that personally protecting the ocean or regrowing mangroves or seagrass is really important to you. 109 00:07:50.279 --> 00:07:54.800 Other times, another person in the same situation may see, I want 110 00:07:54.839 --> 00:07:58.399 to really support these new technologies. You know, direct air caption machines. 111 00:07:58.399 --> 00:08:01.879 Do you know the science fiction solution that take CEO two out of the atmosphere? 112 00:08:01.040 --> 00:08:05.360 Even though they're ridiculously expensive, it's something they feel passionate about, can 113 00:08:05.439 --> 00:08:09.680 prove that it's additional and it's going to be part of the journey to getting 114 00:08:09.680 --> 00:08:13.079 those things more cost effective. So I think it's a really personal decision. 115 00:08:13.120 --> 00:08:18.399 At the end of the day. You introduce here the concept of good credit 116 00:08:18.680 --> 00:08:22.720 bad credit, And of course we've seen a lot of our stories in the 117 00:08:22.759 --> 00:08:30.079 past months, either about people using what I would call very very old credits 118 00:08:30.240 --> 00:08:35.799 or remnants of the clean development mechanism, or using a hydra build in China 119 00:08:35.320 --> 00:08:41.799 fifteen years ago, or using questionable baselines, which means that at the end 120 00:08:41.799 --> 00:08:46.679 of the day you calculate the carbon credit against the business as usual or what 121 00:08:46.720 --> 00:08:50.120 you've seen, are you and blah blah blah blah blah. So what in 122 00:08:50.159 --> 00:08:56.759 your opinion are the criteria to make the distinction between what's a good credit to 123 00:08:56.840 --> 00:09:01.120 buy and what's the useless credit to buy. There's like four or five sort 124 00:09:01.120 --> 00:09:05.559 of criteria that generally are agreed on as being the main considerations that people look 125 00:09:05.600 --> 00:09:11.960 at. The obvious first one you mentioned laurent is additionality. There are millions 126 00:09:11.039 --> 00:09:16.279 and millions of activities going on all day, every day in the world that 127 00:09:16.360 --> 00:09:20.279 reduce emissions. There are, unfortunately more than the number of those activities going 128 00:09:20.279 --> 00:09:24.799 on the increased emissions. But if all we were to do was cherry pick 129 00:09:24.840 --> 00:09:28.919 the ones that reduced emission and say that they are saving the planet, and 130 00:09:28.960 --> 00:09:31.799 then you could buy those credits as offsets, we would not be helping the 131 00:09:31.799 --> 00:09:37.440 planet at all. So it's really really important that the projects and the credits 132 00:09:37.480 --> 00:09:41.080 that you calculate off the back of them are additional to what would otherwise happen. 133 00:09:41.399 --> 00:09:46.120 Though, this concept of additionality is super important and that affects every project 134 00:09:46.159 --> 00:09:48.440 type. So you mentioned some of these big and renewable energy projects hydro or 135 00:09:48.519 --> 00:09:52.600 win that were developed and say ten fifteen years ago. I agree with you. 136 00:09:52.720 --> 00:09:56.240 I think that the case that those project would not have been built in 137 00:09:56.240 --> 00:10:00.919 the absence of the carbon finance attached to them is pretty sketchy. But then 138 00:10:00.960 --> 00:10:05.759 you can compare that to say a mangrove restoration project. Now that's being done 139 00:10:05.759 --> 00:10:11.960 in the Philippines or somewhere where it's unequivocally financed by the commitments to sell the 140 00:10:13.000 --> 00:10:16.039 carbon credit, and that's a much clearer case. The second issue is the 141 00:10:16.320 --> 00:10:20.840 quantification of the credits. So in many cases the project may be additional. 142 00:10:20.960 --> 00:10:24.159 That's fine, you get over that hurdle. The next one is, well, 143 00:10:24.200 --> 00:10:26.399 how many carbon credits you claim it from this? And this is where 144 00:10:26.480 --> 00:10:30.840 where a lot of the criticism has come from in the media recently, and 145 00:10:30.879 --> 00:10:33.360 we've been quite vocal about it here at Drove. We said that, you 146 00:10:33.399 --> 00:10:37.799 know, for example, rolling out cookstoves in Africa, millions of cookstoves really 147 00:10:37.799 --> 00:10:43.360 doing a great job helping local people use wood much more efficiently in their homes 148 00:10:43.360 --> 00:10:46.639 because they a lot of them. You know, three billion people around the 149 00:10:46.639 --> 00:10:50.519 world still use wood in open fires for cooking incredibly inefficient, and the fact 150 00:10:50.559 --> 00:10:54.960 if you can put a simple stove in their home improves their efficiency two or 151 00:10:54.000 --> 00:10:58.840 three times, and therefore they need less wood and therefore there's less pressure on 152 00:10:58.960 --> 00:11:01.080 local wood sources, which is good for the planet. But how many credits 153 00:11:01.120 --> 00:11:05.919 do you claim from that? The key factor is what's the amount of wood 154 00:11:05.919 --> 00:11:07.960 that you're picking, you're taking from the forests to put into those things. 155 00:11:07.960 --> 00:11:11.440 If you get that factor wrong, the projects themselves may be really good, 156 00:11:11.480 --> 00:11:16.320 but you're just claiming too many carbon credits. So there's a quantification, there's 157 00:11:16.360 --> 00:11:18.240 permanence. So if I protect a forest, you know, the rates of 158 00:11:18.279 --> 00:11:24.480 global deforestation are increasing again unfortunately, and they really need protecting these really important 159 00:11:24.480 --> 00:11:26.879 assets. But if I pick an area of land and then it burns down 160 00:11:28.080 --> 00:11:31.840 subject to pests and actually forest fires are increasing globally because the climate change, 161 00:11:31.120 --> 00:11:35.159 now that carbon's just all been released into the atmosphere, So what happens in 162 00:11:35.159 --> 00:11:39.720 that situation and leakage? So if I protect an area of forest in one 163 00:11:39.759 --> 00:11:43.399 area, but the area next door is cut down net net, we haven't 164 00:11:43.559 --> 00:11:46.840 made any difference, am I just cherry picking the bits that have been preserved. 165 00:11:46.080 --> 00:11:50.440 And so it's a whole bunch of issues that all come together and combine 166 00:11:50.759 --> 00:11:54.120 to sort of get to this notion of a single word meaning quality. We've 167 00:11:54.159 --> 00:11:58.200 been doing a lot of work and I guess so you've been associated in the 168 00:11:58.240 --> 00:12:03.840 integrity and Seal for the voluntary cabin market, which kind of summarize with the 169 00:12:03.879 --> 00:12:09.720 care cabin principles what you've been explaining your company and others. You're providing much 170 00:12:09.720 --> 00:12:13.639 more data than we used to have even five years ago. I'm also very 171 00:12:13.759 --> 00:12:18.720 encouraged by the fact that now you've got satellite data which allowed to have a 172 00:12:18.799 --> 00:12:22.639 much more accurate monitoring of what's going on, especially in forestry in places which 173 00:12:22.639 --> 00:12:28.519 are hard to reach. So would you say that we start having the tools 174 00:12:28.519 --> 00:12:33.519 and methodology to really establish trust on this market, and people who in good 175 00:12:33.600 --> 00:12:39.039 faith don't have your expertise to analyze in a very annular way could buy a 176 00:12:39.120 --> 00:12:45.320 more standard cabin credits that at least they could rely on absolutely. And that's 177 00:12:45.399 --> 00:12:50.519 the role that we play. We try and we do achieve much higher level 178 00:12:50.759 --> 00:12:54.960 of transparency than was there before. There are judgment calls that need to be 179 00:12:54.000 --> 00:13:00.399 made in these projects. The methodologies that sort of underlie the standards will have 180 00:13:00.639 --> 00:13:05.360 interpretation aspects to them, and that has allowed there to be a variability in 181 00:13:05.480 --> 00:13:07.720 theory. We shouldn't need to create the quality of projects, which is why 182 00:13:07.759 --> 00:13:13.360 your work at ICBCM is so interesting and so important. The bar that the 183 00:13:13.559 --> 00:13:18.960 ICVCM sets for what good looks like is going to be really, really interesting 184 00:13:20.679 --> 00:13:24.039 because our basic numbers are saying that very very few projects, from what I 185 00:13:24.200 --> 00:13:30.399 know of the work that the ICBCM is doing, would meet those standards as 186 00:13:30.440 --> 00:13:33.879 they are being operated and presented today. That doesn't always mean they are not 187 00:13:35.000 --> 00:13:37.639 good projects. It's just they haven't produced a documentation to prove they are. 188 00:13:37.840 --> 00:13:41.399 So a lot of this is about the proof that is needed. But the 189 00:13:41.519 --> 00:13:46.759 key thing in the work of the ICVCM and it's counterpart on the buy side, 190 00:13:46.759 --> 00:13:52.360 the Voluntary Carbon Market Integrity Initiative the VCMR, which is trying to clarify 191 00:13:52.399 --> 00:13:58.039 how companies make claims about the use of carbon credits, is that the bars 192 00:13:58.080 --> 00:14:01.480 they set are high, but they need to bring the companies and the markets 193 00:14:01.480 --> 00:14:05.600 along with them at the right rate. If the bar is set too high, 194 00:14:05.720 --> 00:14:09.639 that there could be a reaction to well, it's not achievable, therefore 195 00:14:09.840 --> 00:14:13.960 should we bother. If it's set too low, then it's going to be 196 00:14:13.039 --> 00:14:18.240 argued that it's not actually moving the needle in terms of quality, But it's 197 00:14:18.240 --> 00:14:20.840 the transition. How do we get from where we are today to where we 198 00:14:20.879 --> 00:14:26.159 need to be without putting off companies from this market and bringing them to the 199 00:14:26.240 --> 00:14:30.960 table and saying everything you're doing is great, but we can make it better, 200 00:14:31.320 --> 00:14:33.519 rather than you shouldn't just pack up your bags and go home. I 201 00:14:33.600 --> 00:14:39.519 was on stage recently at Imperial College in London arguing the case against a certain 202 00:14:39.679 --> 00:14:45.279 media journalist who'd been quite critical of this space, and there's a misinterpretation of 203 00:14:45.320 --> 00:14:50.960 what companies actually are doing. The interpretation from the purists is that companies have 204 00:14:50.000 --> 00:14:54.480 set a net zero target or a climate have set a climate objective, and 205 00:14:54.559 --> 00:14:58.600 therefore they will spend an infinite amount of money to make that commitment work. 206 00:14:58.000 --> 00:15:03.399 The alternative is if I try to achieve that target by using carbon credits, 207 00:15:03.399 --> 00:15:07.440 and those carbon credits are deemed to be unworthy, then the whole thing is 208 00:15:07.480 --> 00:15:11.279 a sham and the company's deserves all the criticism it gets. The binary world 209 00:15:11.279 --> 00:15:15.759 of do I make my emission reduction target at infinite cost or buy my way 210 00:15:15.799 --> 00:15:18.480 out with a carbon credit? Those are not the only two. The reality 211 00:15:18.679 --> 00:15:22.960 is there is are not the only two games in town. There is a 212 00:15:22.039 --> 00:15:28.480 third, and that's do absolutely nothing. Companies are making these commitments voluntarily. 213 00:15:28.759 --> 00:15:31.879 Yes there's interest from stakeholders, but they do not have to do this. 214 00:15:31.480 --> 00:15:37.279 And if you look at the rhetoric now in the US around run de Santis, 215 00:15:37.360 --> 00:15:41.240 who's running for the Republican nomination, who says the business of business is 216 00:15:41.320 --> 00:15:46.360 business, and there should be the businesses to make profits for shareholders. Do 217 00:15:46.480 --> 00:15:50.519 not engage in ESG activities. If you do, you are not fulfilling your 218 00:15:50.600 --> 00:15:56.840 fiduciary responsibility. If that movement takes hold, the risk is that companies who 219 00:15:56.840 --> 00:15:58.600 are trying to do the right thing on climate will just throw their hands up 220 00:15:58.600 --> 00:16:02.360 in the air and say, it's not my problem anymore. If you want 221 00:16:02.440 --> 00:16:04.879 us to do anything, regulate us, and the voluntary action will take a 222 00:16:04.919 --> 00:16:10.240 backseat. So we have to be very careful about pushing companies too hard and 223 00:16:10.320 --> 00:16:14.639 too fast into this sort of like purest world guy, Can I just switch 224 00:16:14.720 --> 00:16:18.279 track a little bit and just to ask you about the whole the world of 225 00:16:18.320 --> 00:16:22.000 it. There's a whole pile of carbon emissions in the IT world that we 226 00:16:22.000 --> 00:16:25.799 don't talk about. I could actually argue that the heavy industry of the future 227 00:16:26.120 --> 00:16:29.159 is all these digital companies, whether the Amazon, Googles, etc. And 228 00:16:29.200 --> 00:16:32.399 I know they're at the forefront of it in some respect in terms of going 229 00:16:32.399 --> 00:16:34.360 out there and trying to lead in this area. But I suppose. My 230 00:16:34.440 --> 00:16:40.639 question is, are they really leading what's your whole you're taking that whole digitalization 231 00:16:40.919 --> 00:16:48.120 and carbonization. It's a really interesting area, and I am right in saying 232 00:16:48.200 --> 00:16:52.639 that something like two or three percent of world electricity consumption is coming now from 233 00:16:52.720 --> 00:16:56.480 data centers. It might be more than that. It maybe four or five 234 00:16:56.519 --> 00:16:59.519 percent. It's a large number, and it's growing. I can see why 235 00:16:59.679 --> 00:17:03.879 it's a very topical issue. The interesting thing about the IT industry is it's 236 00:17:03.919 --> 00:17:08.759 quite concentrated. How many cloud companies are out there that are household names two, 237 00:17:08.839 --> 00:17:14.480 three, aws A zero for Microsoft, they're the household names. There's 238 00:17:14.480 --> 00:17:18.240 probably a whole plethora of others behind the scenes. But you can point your 239 00:17:18.279 --> 00:17:22.200 finger at some very very large and very wealthy company saying you are the problem 240 00:17:22.279 --> 00:17:26.079 here. But the interesting thing is that that impact is distributed to nearly every 241 00:17:26.359 --> 00:17:30.319 human being on the planet. And when you look at the impact that we 242 00:17:30.359 --> 00:17:33.279 are having at an individual level my phone, the fact that I'm now doing 243 00:17:33.279 --> 00:17:37.160 this podcast with you, we're using electricity through the ether on my monitor, 244 00:17:37.599 --> 00:17:41.359 it's actually really very small as an individual level because there are so many people 245 00:17:41.519 --> 00:17:45.079 using it. And when we did our calculations on this. Two years ago, 246 00:17:45.079 --> 00:17:48.359 we did a big, big study and very very sort of comprehensive analysis 247 00:17:48.359 --> 00:17:53.440 of digital carbon footprints. We found that the fact that you store your photos 248 00:17:53.920 --> 00:18:00.720 and send your Instagram pictures to your friends actually isn't the digital carbon footprint from 249 00:18:00.720 --> 00:18:04.039 those images isn't the problem. Most of the problem comes from the device you're 250 00:18:04.119 --> 00:18:08.160 using, the screen you're using, and whether you're using Wi Fi, hard 251 00:18:08.200 --> 00:18:12.119 cable or five G and also the time of day that you're doing it. 252 00:18:12.440 --> 00:18:17.559 And if you want to watch your favorite Netflix film on a plasma screen at 253 00:18:17.559 --> 00:18:22.519 home, that's going to have a dramatically different live streaming rather than you storing 254 00:18:22.559 --> 00:18:26.319 it, downloading it to your hard drive and watching it on your iPad. 255 00:18:26.680 --> 00:18:30.519 Those two carbon footprints are dramatically different. So behavior makes a difference, but 256 00:18:30.680 --> 00:18:36.200 actually the images on a personal level, that not the major problem. I 257 00:18:36.319 --> 00:18:40.960 came into that conversation with a bit of a provocative title, which is is 258 00:18:41.000 --> 00:18:45.400 carbon the new crypto? And of course with the high integrity credits and the 259 00:18:45.480 --> 00:18:49.880 others people have to follow. Really the work done around the best credits if 260 00:18:49.920 --> 00:18:56.119 I look at the prices, So I'm using here website called carbon credits dot 261 00:18:56.119 --> 00:18:59.160 com. I don't know how good it is, but it says aviation industry 262 00:18:59.200 --> 00:19:04.519 upset one point forty two dollar paton minus six to date natural base of st 263 00:19:04.599 --> 00:19:08.880 two point twenty nine dollar pat and even take base upset. I don't know 264 00:19:08.880 --> 00:19:12.079 what that means, is your on point eight eight? So it doesn't look 265 00:19:12.119 --> 00:19:17.480 that there is much demand. We're just talking about something virtualois are there returns 266 00:19:17.759 --> 00:19:22.359 moving around? It's an interesting parallel that you say, you know is carbon 267 00:19:22.480 --> 00:19:27.440 and new crypto. There are parallels, mainly in the hype cycle. I 268 00:19:27.480 --> 00:19:33.359 think crypto has a genuine value, of genuine utility. The way those coins 269 00:19:33.400 --> 00:19:38.400 are created and exchanged, and you know, without government influence, can actually 270 00:19:38.400 --> 00:19:42.440 be useful. The underlying technology, distributed ledger technology is very useful. But 271 00:19:42.640 --> 00:19:48.279 there was a hype. The market was way overbought. People were piling in 272 00:19:48.440 --> 00:19:51.079 because they thought it was a license to print money. People made a lot 273 00:19:51.079 --> 00:19:52.839 of money, and then they sold out, and then the new people bought 274 00:19:52.880 --> 00:19:56.880 in and lost a lot of money. The whole thing is unraveled. But 275 00:19:56.079 --> 00:20:00.200 underlying that, I think it will settle down into a useful market, a 276 00:20:00.319 --> 00:20:03.920 much lower level and much more pedestrian. And I think you might see that 277 00:20:03.920 --> 00:20:07.799 happening in carbon There has been a bit of a hype cycle, a lot 278 00:20:07.799 --> 00:20:10.640 of money put into it. We're going to calculate just how much money has 279 00:20:10.640 --> 00:20:12.799 been put into carbon credits. It's now coming off the back of that hype 280 00:20:12.799 --> 00:20:17.440 cycle. But it will settle down. We'll get the rules sorted. Climate 281 00:20:17.519 --> 00:20:19.079 change is a huge problem. We need all tools in our kit bag to 282 00:20:19.119 --> 00:20:22.559 solve it. Carbon credits are one. It will grow. It won't be 283 00:20:22.720 --> 00:20:26.920 booming at two hundred percent growth a year. It will grow more gradually and 284 00:20:26.920 --> 00:20:30.400 I think more sensibly as well, rather than the hype that we had a 285 00:20:30.440 --> 00:20:34.920 year or two ago. Yeah. One of the sector who has done the 286 00:20:34.960 --> 00:20:40.759 most work in relation to carbon credits is the avision industry. They've put out 287 00:20:40.799 --> 00:20:44.839 to a standout a few years ago called cost Ya and they start using it. 288 00:20:44.880 --> 00:20:48.279 But now you see companies like easy Jet to say, okay, we're 289 00:20:48.319 --> 00:20:51.680 not going to use them anymore. And at the same time, we all 290 00:20:51.680 --> 00:20:55.599 know that in order to the carbonize the avision industry, there's not going to 291 00:20:55.640 --> 00:20:57.839 be any hydrogen plane. It's more going to be what they call staff. 292 00:20:59.079 --> 00:21:00.960 But it's going to take a lot of time. So in the meantime, 293 00:21:02.160 --> 00:21:07.000 the general thinking was the use of carbon credits could accelerate the net zero or 294 00:21:07.200 --> 00:21:12.039 introducing the soft while using carbon credits. What you're thinking about the aviation industry 295 00:21:12.079 --> 00:21:17.519 in relation to carbon. Aviation industry relation to carbon has three different pieces to 296 00:21:17.599 --> 00:21:22.519 that question, three different answers. Firstly is what Europe is doing. Europe 297 00:21:22.519 --> 00:21:26.480 has included all aviation within its boundaries in the EU twenty seven to be covered 298 00:21:26.519 --> 00:21:32.559 by the emissions trading scheme, So the emissions from those flights are included within 299 00:21:32.640 --> 00:21:34.880 the scheme, which is trading at about eighteen ninety dollars a ton. So 300 00:21:34.920 --> 00:21:40.039 those companies are having to make sure that they comply with those limits, the 301 00:21:40.119 --> 00:21:44.759 caps on the whole of the European bubble of carbon emissions, of which at 302 00:21:44.799 --> 00:21:48.680 the aviation is part of it. So that point one point two is the 303 00:21:48.799 --> 00:21:53.880 course of the International Aviation Carbon Offsetting Reduction Scheme for International Aviation at which aims 304 00:21:53.920 --> 00:22:00.720 to hold emissions for international aviation constant at eight five of twenty nineteen levels. 305 00:22:00.920 --> 00:22:04.759 For any growth beyond that it needs to be offset. Now, that is 306 00:22:06.000 --> 00:22:11.119 quite a complicated scheme. The intention is well meaning, and the full compliance 307 00:22:11.279 --> 00:22:15.240 with that doesn't actually kick in until two twenty eight with US sort of like 308 00:22:15.319 --> 00:22:18.880 really ratcheting up towards twenty thirty. And the idea of that scheme is that 309 00:22:18.960 --> 00:22:25.160 it's all the offsetting that happens for that those international flights has to be in 310 00:22:25.200 --> 00:22:29.839 addition to what governments are committing to under the Paris Agreement, so that there's 311 00:22:29.839 --> 00:22:33.240 no double counting. What we're doing now under that scheme is really in the 312 00:22:33.240 --> 00:22:37.319 early stages of sort of piloting, and so if there's any supply demand pricing 313 00:22:37.599 --> 00:22:41.440 signals, they're really very early stage. We yet to see that scheme fully 314 00:22:41.480 --> 00:22:45.119 fledged. Now. The third piece is what companies are like easy Jet or 315 00:22:45.160 --> 00:22:48.839 Delta are doing voluntarily to try and communicate to the passengers that they are not 316 00:22:48.920 --> 00:22:52.880 putting carbon into the atmosphere or certainly offsetting some of it. And they have 317 00:22:53.160 --> 00:22:56.039 used a lot of carbon credits, easy Jet and Delta being the largest. 318 00:22:56.079 --> 00:23:00.000 Delta was the largest buyer of carbon credits over the last three or four years 319 00:23:00.000 --> 00:23:03.759 the US air line. They made those purchases in good faith. They genuinely 320 00:23:03.799 --> 00:23:06.559 thought, are we're going to buy carbon credits on the market that have been 321 00:23:06.680 --> 00:23:11.400 verified by independent bodies like VERA or gold Standard, and therefore we're doing the 322 00:23:11.440 --> 00:23:15.000 best we can. They were quite cheap, but now they're being second guest 323 00:23:15.079 --> 00:23:18.400 about where those credits come from and did they actually do what they said they 324 00:23:18.400 --> 00:23:21.599 were doing. But those are voluntary commitments, and you know, I think 325 00:23:21.599 --> 00:23:26.680 what you might see is until the ICVCM and the quality Standards start to come 326 00:23:26.720 --> 00:23:30.599 through with their higher standards, that you might see russ on retraction of airlines 327 00:23:30.599 --> 00:23:34.640 making those voluntary commitments, but all airlines inside Europe and under the AKO of 328 00:23:34.680 --> 00:23:40.119 the International Civil Aviation Organization would still need to make sure they comply with those 329 00:23:40.160 --> 00:23:44.640 requirements. Guy, you've been working this space for twenty years at this point 330 00:23:44.680 --> 00:23:48.759 in time, so I think there's nobody better equipped to talk a little bit 331 00:23:48.799 --> 00:23:52.880 about the future. So Carbon Markets two thirty give us an overview. What's 332 00:23:52.880 --> 00:23:56.240 it look like? I think one of the really interesting things is the way 333 00:23:56.519 --> 00:24:00.880 this whole global sector is shaping up. I mentioned the European emissions Trading scheme 334 00:24:02.119 --> 00:24:04.880 that is the pinnacle of, or the sort of poster child of a cap 335 00:24:04.920 --> 00:24:10.759 and trade scheme which bounds the emissions within a fixed area. And there's also 336 00:24:10.839 --> 00:24:15.519 one in California, there's one in South Korea, and in an Australia growing 337 00:24:15.559 --> 00:24:18.799 now as well. So these are cap and trade schemes, but been running. 338 00:24:18.799 --> 00:24:22.240 The European has been running since two thousand and six. These are difficult 339 00:24:22.279 --> 00:24:25.599 to get right. And China is also developing one as well, so these 340 00:24:25.599 --> 00:24:29.720 are growing. And interestingly, those ideas of cap and trade schemes are bubbling 341 00:24:29.839 --> 00:24:33.240 up in many other countries now, not just developed countries, but developing countries 342 00:24:33.400 --> 00:24:40.960 Indonesia, Vietnam, Mexico, Thailand, Kazakhstan of all places. And what 343 00:24:41.000 --> 00:24:44.799 we could start to see is an interconnectiveness of those schemes. They trade at 344 00:24:44.920 --> 00:24:48.680 very different prices. Europe's about eighteen ninety dollars a ton, China is two 345 00:24:48.759 --> 00:24:52.240 or three dollars a town. South Korea somewhere twenty dollars a ton, And 346 00:24:52.279 --> 00:24:55.279 what we could start to see is an interconnectiveness of that, which would be 347 00:24:55.279 --> 00:24:59.319 extremely exciting. And then you've got the carbon credit world sitting outside that, 348 00:24:59.359 --> 00:25:03.240 which is volun reaction individual projects creating carbon credits from those. This is what 349 00:25:03.279 --> 00:25:07.400 we see in the voluntary carbon market today. We do need to sort of 350 00:25:07.400 --> 00:25:11.039 work on the standards, both on the supply side and also on the demand 351 00:25:11.079 --> 00:25:14.839 side in terms of corporate claims, and that's what the ICBCM and VCMI are 352 00:25:14.880 --> 00:25:17.880 doing. That should grow. I don't think it's going to grow at the 353 00:25:18.000 --> 00:25:19.480 rebels of hype we've seen over the last couple of years. Will be more 354 00:25:19.480 --> 00:25:22.759 modest, but it will still grow. By twenty thirty, we'll certainly see 355 00:25:22.759 --> 00:25:26.960 a much larger market. A lot of company commitments, by the way, 356 00:25:26.000 --> 00:25:30.000 are geared towards twenty thirty, so they're sort of looking towards what they need 357 00:25:30.039 --> 00:25:33.720 to do by those days. And then we could see into connectedness between those 358 00:25:33.759 --> 00:25:38.440 carbon credit markets and the compliance markets. And really, if you strip all 359 00:25:38.480 --> 00:25:45.119 of this jargon back compliance, voluntary credit, CAB and trade, whatever, 360 00:25:45.680 --> 00:25:52.279 what the world's carbon markets are trying to do is use capital, use financial 361 00:25:52.400 --> 00:25:56.440 resources where it is most cost effective to do so in the world. So 362 00:25:56.519 --> 00:26:00.079 a company or a country that's got a high cost for reducing as it makes 363 00:26:00.079 --> 00:26:04.200 so much logical sense to place somebody else to do that where they can get 364 00:26:04.240 --> 00:26:08.480 better bang for their buck, and that's the ultimate objective of all this jargon. 365 00:26:10.160 --> 00:26:14.000 Well, guy, thank you so much for coming, and this is 366 00:26:14.039 --> 00:26:18.759 a very open discussion. It's great to see that beyond the headlines of horror 367 00:26:18.799 --> 00:26:25.720 stories. There are some serious people an organization working to also on that front 368 00:26:25.960 --> 00:26:30.039 make the energy transition, and that zo on his way. Guy, thank 369 00:26:30.079 --> 00:26:33.200 you very much, thanks for giving me the microphone. Oh great, great 370 00:26:33.240 --> 00:26:36.920 having you guy, Lauren was great having Guy on. And I also know 371 00:26:37.039 --> 00:26:41.359 listen you're also an expert in this area and you've been involved in the carbon 372 00:26:41.519 --> 00:26:44.680 area for twenty years at this point in time. I have a question for 373 00:26:44.680 --> 00:26:48.279 here, and it's a provocative but the Guardian ran in June. They ran 374 00:26:48.400 --> 00:26:53.319 an article where it's a destruction of world's pristine rain for a sword in twenty 375 00:26:53.559 --> 00:26:57.160 twenty two, despite Cop twenty six pledge. That was what they wrote. 376 00:26:57.319 --> 00:27:03.279 Let me say what I think. I think the reason that the rainforest destruction 377 00:27:03.359 --> 00:27:07.519 sword was because of the Guardian, because the Guardian was the one that kicked 378 00:27:07.559 --> 00:27:12.759 off all this area of criticism in and around the carbon markets last year and 379 00:27:12.759 --> 00:27:15.960 the result of it was that a whole pile of player has just said, 380 00:27:17.000 --> 00:27:18.359 well, we're out of this and we're not even going to get involved in 381 00:27:18.720 --> 00:27:23.160 Have I been too provocative? Thinks you're to teen years guided? I took 382 00:27:23.559 --> 00:27:29.680 years ago to Brazilian forest the expert and you know We're already looking about carbon 383 00:27:29.759 --> 00:27:33.119 credits for the Amazon forests. Look at that piece of the Amazon forest. 384 00:27:33.559 --> 00:27:37.799 If I trip, I make one million dollar. If I put carbon credits, 385 00:27:37.880 --> 00:27:41.480 I make ten million dollar. So what am I going to do? 386 00:27:41.759 --> 00:27:47.839 And I don't treat the guardian Okay, right, I don't correctly. It's 387 00:27:47.920 --> 00:27:52.079 economics. It's economics, okay, But they are good people in that market. 388 00:27:52.440 --> 00:27:55.799 The good thing is, as you know, two weeks ago, were 389 00:27:55.880 --> 00:28:03.359 released finally the Integrity Council of the recabon market guidelines to separate what we can 390 00:28:03.680 --> 00:28:10.559 call the good credits, which we are respect to core carbon principles, so 391 00:28:10.799 --> 00:28:15.000 the four principles which are additionality permanents. So they say four years, we 392 00:28:15.119 --> 00:28:19.720 need to verify that the credits are ad for four years quantification and leakage. 393 00:28:21.200 --> 00:28:25.160 We put the links in the show notes to the CVC, and so at 394 00:28:25.319 --> 00:28:29.720 least going forward, if people want to engage, they will have the certaintiest 395 00:28:29.839 --> 00:28:33.000 that those credits are not junk. And even if the buys eye like guy 396 00:28:33.119 --> 00:28:37.039 says, yeah, okay, fine, So there's hope that carb markets in 397 00:28:37.079 --> 00:28:41.880 the future. Basically there's hope. But let's face it, it's when I 398 00:28:41.039 --> 00:28:45.279 used to do carbon. Twenty years ago, it was the only game in 399 00:28:45.400 --> 00:28:48.759 town. And now everything's bigger. He pumps are bigger. If he's bigger, 400 00:28:49.359 --> 00:28:53.319 saw as bigger, it's bigger, batteries are bigger. A lot of 401 00:28:53.400 --> 00:28:57.400 talks, but it's going to remain a very niche instrument. So jah. 402 00:28:57.720 --> 00:29:03.480 In conclusion, it's a market with complexity is inversely proportional to its size. 403 00:29:07.039 --> 00:29:10.400 Okay, I'm glad it's not just me good all right, And I really 404 00:29:10.480 --> 00:29:14.480 love those guys, so I wish the best for the CVCM, but we're 405 00:29:14.519 --> 00:29:17.279 going to put our ship in a different bucket. Okay, my friend. 406 00:29:17.359 --> 00:29:23.319 And that positive note, we thank ASKSPO for powering the show. Guys, 407 00:29:23.440 --> 00:29:27.599 thank you very much. I love you. We talked into weeks time on 408 00:29:27.720 --> 00:29:32.960 another controversial subject, which is going to be your term. Oh I looked 409 00:29:33.000 --> 00:29:37.720 forward to. Thank you for listening to Redefining Energy. Don't forget to rate 410 00:29:37.799 --> 00:29:42.079 the show and subscribe on Apple, Podcast, Spotify, or the platform of 411 00:29:42.160 --> 00:29:42.720 your choice.