🌎 The UN gives (carbon) credit where it’s due #223

Happy Monday!

We’ll spare you the obligatory “good COP, bad COP” joke, but this week, we’ve got a deep dive into the UN’s biggest move at COP29 so far: the approval of Articles 6.2 and 6.4, which allow countries to trade carbon credits to meet their national targets and finally set standards for the eligibility of these credits.

In deals, $5.8bn for EV manufacturers, $318m for renewable energy services across two deals, and $100m for micronuclear reactors.

In other news, Trump’s picks for climate-related agency heads; oil and gas execs publicly say that deregulation would be bad for business; and the Dutch ruling that Shell must reduce emissions is back in court.

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The VCM, open for business

Despite the controversy surrounding COP29 this year, we have to give (carbon) credit where it’s due. Last week, negotiators broke a long-standing deadlock and approved standards to govern the trade of emissions credits among countries — which could finally lay down the law in the “Wild West” that is the Voluntary Carbon Market (VCM) and unlock new investment .

What happened

The climate community has voiced strong criticism of this year’s UN Climate Change Conference, hosted in Baku, Azerbaijan — the third COP held in a petrostate. With scientists warning that the 1.5°C goal is increasingly out of reach, hosting a climate summit that draws hundreds of industry lobbyists, in a nation whose president hails fossil fuels as a “gift from God,” alongside allegations of human rights abuses, has understandably sparked skepticism.

But from the jump, negotiators seemed to make progress by approving Paris Agreement Articles 6.2 and 6.4:

🔁 Article 6.2: Trading credits, country-to-country: Countries can collaborate directly through bilateral or multilateral agreements to meet their climate targets (NDCs) by trading emission reduction credits, known as Internationally Transferred Mitigation Outcomes (ITMOs). Think of it as a flexible, decentralized system for carbon trading.
🛒 Article 6.4: A centralized carbon marketplace: Unlike the open-ended cooperation under Article 6.2, Article 6.4 creates a structured, supervised system for trading emission credits on an international stage, called the Paris Agreement Crediting Mechanism (PACM). It enacts requirements for developing projects, under a governance structure led by a Supervisory Body already in place. This framework should ensure credits, called A6.4ERs, are rigorously validated, verified, and issued, whether from public or private projects, before entering the global carbon market.

If successful, PACM would unlock significant bilateral investment in both private and public Carbon Dioxide Removal (CDR) projects and emissions reductions projects, shifting capital flows from high-income to low-income regions.

Notably, however, critics said that the process was fast-tracked and bypassed state oversight. Prior to final approval, the Supervisory Body adopted the two standards shaping Article 6.4 without state negotiations, seeking COP29 endorsement after the fact. This approach could set a precedent for bypassing negotiation processes in future COPs, adding uncertainty to the framework.

Why it matters

While a global carbon market theoretically optimizes emissions reductions at the lowest cost, it has been stalled by disagreements over its integrity (and whether countries should focus on emissions reductions domestically). The sector has seen declines in recent years amid these questions. Now, the UN is stepping in an attempt to set a standard, a long overdue measure.

voluntary carbon markets — *Image via Sightline Climate; data via* *Ecosystem Marketplace.*

This opens up opportunities in projects with Biomass Carbon Removal and Storage (BiCRS), as well as forestry. Countries with large endowments of land resources will be more likely to become sellers. According to IETA, the market value of financial flows between countries could exceed $1 trillion per year in 2050 and reduce mitigation costs by $21 trillion between 2020 and 2050, driven by a sharp rise in global carbon prices over time.

The stakes are high — as applications for accreditation under PACM open, organizations seeking accreditation from PACM will need to comply with UN standards, undergo a review process, and earn the accreditation.

What’s next

Implications for CDR sector, investors, and insurance: Increased activity in land-use and nature-based carbon sinks is likely, especially from nations with abundant land resources. However, concerns around permanence and leakage persist. The UN standard also requires insurance or guarantees to cover the risk of avoidable reversals (although further guidance on what qualifies as "avoidable" versus "unavoidable" is expected to come). Companies like CarbonPool, Howden, Oka, and Kita that provide these services could benefit (go deeper into carbon markets insurance here).
There are still plenty of details to argue about: The PACM registry, essential for trading credits, is not expected to be operational until 2025-2026. Committees under the Supervisory Body must finalize a set of ‘tools’ to ensure emission reductions are credible, durable, and avoid unintended consequences. Stakeholders still have major disagreements about how carbon market registries should be handled, and Carbon Market Watch reports that COP members could reject the text. With all this still in play, week 2 of COP is setting up to be a contentious one.
Let the race for accreditation begin: Currently, no projects have been fully registered under Article 6.4. Registries, like verra, and gold standard, will race to apply for accreditation under UN standards, a new review process. The outcome could potentially ultimately render some existing standards and methodologies redundant — or, because of these standards’ broad scope and tech-neutral approach, allow low-quality credits to slip through. Here, the broad applicability of the current UN standards is both an advantage and a risk: Without clear methodologies, the market may continue to face scrutiny or lack credibility — a VCM déjà vu.

Sightline Climate clients can view the full carbon markets landscape here.

Deals of the Week (11/11 - 11/17)

Late-Stage / Growth

⚡ Radiant, a Los Angeles, CA-based nuclear microreactor developer, raised $100m in Series C funding from DCVC, Chevron Technology Ventures, Felicis, and the Washington State Department of Commerce.

🌾 Elicit Plant, a Vivonne, France-based water-resistant biosolutions for crops platform, raised $48m in Series B funding from Carbyne Equity Partners, BPI EcoGreenTEch, European Circular Bioeconomy Fund (ECBF), and Sofinnova Partners.

🥩 Plantible Foods, a San Marcos, CA-based plant-based protein developer, raised $30m in Series B funding from Piva Capital, Siddhi Capital, Astanor Ventures, Betagro, Cultivate Next, and other investors.

🥩 Shiru, an Emeryville, CA-based plant based ingredients developer, raised $16m in Series B funding from S2G Ventures, CPT Capital, Lux Capital, Meach Cove Capital, and Nourish Ventures.

✈️ ePlane, a Limassol, Cyprus-based electric flying taxi developer, raised $14m in Series B funding from Antares Ventures, Speciale Invest, Anicut Capital, Javas Venture, Micelio Fund, and other investors.

Early-Stage

💨 Vaulted Deep, a Houston, TX-based biomass carbon removal and storage developer, raised $32m in Series A funding from Prelude Ventures, Earthshot Ventures, Fall Line Capital, Lowercarbon Capital, Rethink Impact, and other investors.

🏠 Accelsius, an Austin, TX-based thermal cooling systems for datacenters provider, raised $24m in Series A funding from Innventure.

🌾 Klim, a Berlin, Germany-based agritech for regenerative agriculture platform, raised $22m in Series A funding from BNP Paribas, Achmea, AgFunder, Ananda Impact Ventures, Earthshot Ventures, and other investors.

🌬 Gazelle Wind Power, a Dublin, Ireland-based offshore wind mooring systems developer, raised $12m in Series A funding from Indico Capital Partners, August One, DST Group, E2IN2, and Wah Kwong.

📦 Naturbeads, a Bath, UK-based biodegradable cellulose ingredients manufacturer, raised $12m in Series A funding from Eos Advisory, CDP Venture Capital, MITO Tech Ventures, PI-NB, and Paragon Capital Management Singapore.

🔋 Tozero, a Munich, Germany-based lithium-ion battery recycling service provider, raised $12m in Seed funding from NordicNinja, Atlantic Labs, Honda Motor Company, In-Q-Tel, JGC Holdings Corporation, and other investors.

🧱 C2CA technology, an Utrecht, Netherlands-based recycled demolition concrete service provider, raised $11m in Series A funding from ADR Technology, Chrysalix Venture Capital, Cimsa Building Materials, Delft Enterprises, Energy Transition Fund Rotterdam, and other investors.

🔋 Vecmocon Technologies, a New Delhi, India-based full-stack EV service provider, raised $10m in Series A funding from Ecosystem Integrity Fund, Blume Ventures, and British International Investment.

🏠 KUGU, a Berlin, Germany-based building energy management platform, raised $9m in Series A funding from Gewobag ID, Tengelmann Ventures, Axel Müller, Future Energy Ventures, IBB Ventures, and other investors.

💨 General Galactic, an El Segundo, CA-based carbon conversion technology developer, raised $8m in Seed funding from Harpoon Ventures, Refactor Capital, BoxGroup, Climate Capital, Impact First, and other investors.

⚡ Copernic Catalysts, a Cambridge, MA-based novel chemical catalysts developer, raised $8m in Seed funding from Breakout Ventures, Engine Ventures, Future Ventures, Impact Science Ventures, Innospark Ventures, and other investors.

⚡ Sniffer Robotics, an Ann Arbor, MI-based drones for methane emission detection service provider, raised $1m in Seed funding.

Other

🚗 Rivian, an Irvine, CA-based EV manufacturer, raised $5.8bn in funding from Volkswagen.

⚡ ZEN Energy, an Adelaide, Australia-based renewable energy platform, raised $28m in Corporate Strategic funding from Enlight Renewable Energy.

💧 Axine Water Technologies, a Vancouver, Canada-based wastewater treatment technology designer, raised $15m in Corporate Strategic funding from Veralto.

🔋 Ion Storage Systems, a Beltsville, MD-based solid state li-ion batteries manufacturer, raised $10m in Debt funding from Leonid Capital Partners.

New Funds

Capagro, a Paris, France-based investment firm, raised $121 million for their second fund that will invest across early-stage agriculture and foodtech companies.

BlueGreen Ventures, a Washington, DC-based investment firm, launched a $75m fund targeting early-stage startups, with a focus on climate, fintech, and consumer-driven sectors.

Intudo Ventures, a Jakarta, Indonesia-based investment firm, raised $50m to fund renewable energy initiatives and natural resource development.

Bynd Venture Capital, a Lisbon, Portugal-based investment firm, launched a $42m fund to support pre-seed and seed-stage European ESG-focused startups.

Can’t get enough deals? See full listings and deal analytics on Sightline Climate.

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In the News

In US political news, Trump has begun to announce his picks to lead agencies. Trump nominated Lee Zeldin, former NY congressman and NIMBY, to lead the EPA, in a shift toward business-friendly policies and potential rollbacks of environmental regulations. He also chose fracking company CEO Chris Wright to head the DOE, and North Dakota Gov. Doug Burgum was his pick to be interior secretary. Furthermore, the choice of Elise Stefanik for UN ambassador, known for her America First stance, could also affect international climate cooperation. These nominations, alongside appointing Elon Musk and Vivek Ramaswamy to the Department of Government Efficiency, signal a skeptical approach to climate policy and raise the potential risk of federal agencies like the EPA being weakened.

Republicans have officially taken the House, and of the 18 Republican members of the House of Representatives advocating to preserve the energy tax credits in the Inflation Reduction Act, three have lost to Democratic opponents and one is due for a recount. As for the four House seats Republicans have flipped, three have campaigned against the “radical climate agenda” and one, Tom Barrett, has earned a score of 32% from the Michigan League of Conservation Voters during his time in the state Senate, making him a potential Conservative Climate Caucus recruit. This leaves us just about where we started, with the politics of repealing the IRA teetering on an edge.

However, ExxonMobil CEO Darren Woods has advised President-elect Donald Trump to maintain existing methane regulations, cautioning that deregulation could harm the oil industry's reputation and hinder efforts to reduce emissions, as did Patrick Pouyanné, CEO of TotalEnergies. Relatedly, the EPA finalized a rule imposing fees on oil and gas companies that emit methane above specified thresholds, which bigger oil & gas companies have already begun to work on compliance for, but smaller ones face challenges meeting. However, Republican lawmakers have expressed intentions to repeal the fee, citing concerns over its impact on the energy sector.

Meanwhile, a federal court ruling has thrown the regulatory framework of the National Environmental Policy Act (NEPA) into disarray, declaring that the Council on Environmental Quality’s rules, which have guided environmental permitting for decades, lack legal authority. This decision creates significant uncertainty for infrastructure projects and environmental oversight, potentially empowering individual judges to shape NEPA’s implementation while weakening tools used by agencies and challengers alike to navigate environmental review processes.

In international legal news, the 2021 Dutch court ruling requiring Shell to cut emissions by 45% has been overturned, and is now heading to the Dutch Supreme Court, where a final decision could take years. This was the leading case in the recent surge of climate litigations, and represents a move from investor activism to leveraging legal mechanisms, so this delay raises questions about the pace of climate accountability for major emitters.

UK Prime Minister Keir Starmer has reaffirmed his commitment to ambitious climate goals, aiming to make Britain a clean energy superpower by 2030 at COP29. While the UK is not currently on track for its targets due to a lack of funds and soft power, all eyes are on major global powers to step up in funding climate projects at COP29. The EU and China are both seeking to be leaders in climate policy; however, COP29 did see a noticeable absence of the US.

In nuclear news this week, six more countries joined the declaration to triple global nuclear energy capacity by 2050, bringing the total number to 31. In the US, the Nuclear Regulatory Commission (NRC) also proposed a new licensing framework for advanced nuclear technologies like small modular and microreactors. Plus, the Biden administration released a blueprint for an additional 200 GW of nuclear power by 2050, which is likely to survive the administration change, signaling that the continued momentum for nuclear power.

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Opportunities & Events

📅 The State of EV Infrastructure: Register to attend the State of EV Infrastructure Conference on November 20th to explore key challenges and investment trends in the industry, including structural grid issues and policy frameworks impacting the development of EV infrastructure.

💡 Asahi Group Holdings Challenge: Apply to participate in the Asahi Group Holdings Challenge by November 29th and access Asahi's network, insights, and tools, with the potential to form a long-term commercial relationship.

💡 RESPOND Accelerator: Apply to participate in the sixth cohort of the RESPOND Accelerator by November 30th to access a program focused on responsible leadership and the transition toward a net-zero economy.

📅 Powering Net Zero Week 2024: Register to attend Powering Net Zero Week from December 3–6th in the UK to connect with leaders tackling the engineering challenges of achieving net zero through conference sessions, tutorials, and technical visits.

📅 MCJ Holiday Happy Hour: RSVP to join the MCJ Holiday Happy Hour on December 4th and reflect on a year of climate wins while re-energizing for the challenges ahead.

💡 Climate & Care Initiative Fund: Apply to the Climate & Care Initiative Fund by December 10th for an opportunity to secure up to $50,000 in funding for your innovative climate tech project in Latin America, the Caribbean, or Sub-Saharan Africa.

📅 Climate Tech Startup & VC Gathering: RSVP to attend Fidelity’s Climate Tech Startup & VC Gathering on December 16th to explore key trends and key players shaping the venture landscape, as well as startup pathways to commercialization.