🌎 A spotlight on shoddy offsets #152

Happy Tuesday!

Recent shake-ups in the voluntary carbon market raise questions about the economics and quality of credits. As the CEO of the largest certification body, Verra, steps down amid a verification scandal, corporates look toward carbon removal’s high-price promise of permanence rather than the uncertainty of cheaper offsets.

Meanwhile, the debt ceiling deal in the US could include some good news for clean energy permitting and exclude cuts to IRA climate provisions. Global investments in fossil fuels are expected to fall behind solar energy this year, and Ford teams up with Tesla to expand its EV charging network.

This week in deals, a “fishtech” unicorn reels in $108M, DERs aggregate $27M, and superconductors for transmission lines attract $25M.

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Do not roll the (carbon) credits

The voluntary carbon market and its carbon credits are in limbo.

Last week, the CEO of Verra, the largest carbon credit certification body, resigned after accusations of “worthless” carbon credits. The week prior, Zimbabwe’s government claimed 50% of all revenues generated from offset projects developed within its borders. Uncertainty about the integrity and security of nature- and renewables-based projects has prompted many organizations to move toward higher-quality carbon removal credits.

Before diving in, feel free to read our primer on the voluntary carbon market here.

What’s all the fuss about?

Verra is meant to be the authenticator for a ~$2B market that is, as labeled, voluntary. Like the government-regulated organic stamp for food, Verra approval is supposed to certify that project developers and sponsors follow practices that yield quality carbon credits (i.e., the projects actually lead to additional greenhouse gas reductions). However, years of investigations by publications including The Guardian, Bloomberg Green, and ProPublica have exposed major faults in the voluntary carbon market—and Verra specifically.

Last week, the Guardian reported that 93% of the credits Chevron bought, many of which were validated by Verra, were “worthless or junk.” Rather than acting as the arbiter of high-quality nature restoration and conservation, Verra has given many businesses a license to pollute—all while they boast environmental-friendliness. In light of these reports, Verra’s CEO David Antonioli announced his decision to step down and industry experts called for Verra to update its methods with the latest verification tech.

Plus, geopolitical uncertainty. Beyond being unable to trust the primary authority on carbon credit verification, carbon credit project developers are facing a new liability.

The risks to a carbon credit project are already numerous: natural disasters (e.g., wildefire), fraud, insolvency, etc. Now, geopolitical risk has entered the mix as Zimbabwe’s government announced it will take half the revenue from privately-back carbon credit projects.
When a country ranked 12th for carbon carbon credit development decides to nationalize and appropriate project revenues, developers are likely to look to other geographies or stop development entirely due to concern other countries might follow suit. This could hamstring the short- and long-term supply of carbon credits.

Together, these events result in less trust for the voluntary carbon credit market during a period when we have no time to lose. The U.N. Intergovernmental Panel on Climate Change projects that by 2050, the world has to remove the equivalent of 10 gigatons of carbon dioxide per year. While the market for nature- and renewables-based projects sorts itself out, corporates are turning elsewhere for carbon credits.

Flight to quality

Corporates are now moving toward conspicuous purchasing—buying more expensive, higher-quality credits rather than those certified by Verra.

In the last two weeks:

JPMorgan announced it will spend >$200M on carbon removal technologies, $75M of which was committed to Frontier in April.
Microsoft pre-purchased ~2.8M tons of carbon capture from Ørsted.
And Frontier has facilitated $53M in offtake agreements with Charm Industrial to remove 112,000 tons of CO2.

Rather than buying 100 lower-quality credits that remove/sequester 100 metric tonnes of CO2e from the atmosphere on paper, corporates are vying to buy 10 higher-quality removal credits that remove/sequester 10 metric tonnes of CO2e for the same price.

Looking ahead. As voluntary carbon market players, from Verra to project developers, undergo some introspection and transformation, we are likely to see stronger market demand for:

🛰 Measurement, reporting, and verification (MRV) technologies to validate the quality and integrity of projects

🧯 Risk transfer options (e.g., insurance or derivatives) to limit projects’ financial downside

🪧 Reforming or breaking up organizations like Verra that have taken too much of central role in and that have fallen behind trends

💎 Permanent carbon removal projects that are less exposed to human and natural risks

Several factors also remain uncertain: supply-demand dynamics, the new cost to develop projects, the role of low-cost credits, and the impact of the voluntary market on the compliance market. In the meantime, we need more organizations to model those committed to Frontier and to step up their carbon removal purchasing game.

Deals of the Week (5/22-5/29)

Venture Fundings

🐄 eFishery, a Bandung, Indonesia-based aquaculture technology company, raised $108M in Series D funding from G42 Expansion Fund, Softbank Vision Fund, and Northstar Group.

⚡ ConnectDER, a Falls Church, VA-based DER and meter adapter provider, raised $27M in Series C funding from Energy Innovation Capital, LG Technology Ventures, Evergy Ventures, Riverstone LLC, Skyview Ventures, Clean Energy Ventures, and Avista .

⚡ VEIR, a Boston, MA-based developer of high temperature superconductors for electricity transmission, raised $25M in Series A funding.

💸 Novisto, a Montréal, Canada-based ESG software platform, raised $20M in Series B funding from Inovia Capital, White Star Capital, Portage Ventures, Diagram Ventures, and SCOR Ventures.

💨 Pluton Biosciences, a Saint Louis, MO-based microbes for carbon sequestration developer, raised $17M in Series A funding from Fall Line Capital, First In Ventures, Grantham Environmental Trust, Illumina Ventures, iSELECT FUND, RA Capital Management, Radicle Growth, and Wollemi Capital.

🛰️ Satellite Vu, a London, UK-based thermal satellite monitoring company, raised $16M in Series A funding from Molten Ventures, Lockheed Martin, Seraphim Space, and Earth Sciences Foundation.

⚡ Endua, a Brisbane, Australia-based green hydrogen generation and storage technologies company, raised $11.8M in Seed funding ($7.5M equity, $4.3M grants) from 77 Partners, Ampol, Main Sequence Ventures, Melt Ventures, and Queensland Investment Corporation and Grant funding from AusIndustry and Advanced Manufacturing Growth Centre.

💧 Waterplan, a San Francisco, CA-based water risk monitoring platform, raised $11M in Series A funding from Base10 Partners, Giant Ventures, Transition Global, Y Combinator, and MCJ Collective.

💨 UNDO, a London, UK-based enhanced rock weathering carbon removal company, raised $10M in Seed funding from Lowercarbon Capital and AENU.

⚡ PIONIX, a Bruchsal, Germany-based open source EV charging provider, raised $5M in Seed funding from Axeleo Capital, MobilityFund, Pale Blue Dot, Vireo Ventures, and Yabeo Capital.

⚡ UrbanChain, a Manchester, United Kingdom-based peer-to-peer energy services company, raised $5M in Series A funding from Eurazeo.

🌱 Dayrize, an Amsterdam, Netherlands-based impact assessment for consumer products platform, raised $4M in Seed funding from Gresham House Ventures.

🏠 Vensum Power, an Espoo, Finland-based power converter technology developer, raised $4M in Seed funding from Lifeline Ventures, Grid.vc, and Business Finland.

🚢 zero44, a Berlin, Germany-based maritime emissions management software provider, raised $3M in Seed funding from Atlantic Labs, Innoport, and STARTHUB VENTURES.

🏠 Stride, a Ho Chi Minh City, Vietnam-based eco-friendly home improvement platform, raised $2M in Seed funding from Clime Capital and Touchstone Partners.

🌾 Picketa Systems, a Fredericton, Canada-based precision agriculture platform, raised $1M in Seed funding from Desjardins Venture Capital, Emmertech, Koan Capital, NBIF’s Venture Capital Fund, and Tall Grass Ventures.

🔋 EMO Energy, a Bangalore, India-based battery platform for two/three-wheelers, raised $1M in Seed funding from Gruhas Proptech and Transition Venture Capital.

💸 Pyrpose, a Geneva, Switzerland-based climate finance platform, raised $1M from CV VC.

Other Fundings

🔋 Pulse Clean Energy, a London, UK-based energy storage and grid stability facilities developer, raised $216M in a credit facility from Santander, UK Infrastructure Bank, CIBC, and Investec.

⚡ Genus Power Infrastructure, a Jaipur, India-based smart meter solutions provider, raised $50M in debt from U.S. International Development Finance Corp.

✈️ Fokker, an Amsterdam, Netherlands-based aerospace company, received $27M in grant funding from the Dutch government and EU Clean Aviation grant to develop liquid hydrogen for commercial flights.

Exits

💧Xylem, a Washington, D.C.-based water technology developer, completed its $7.5B all-stock acquisition of Evoqua Water Technologies.

💧Siemens Energy, a Munich, Germany-based renewable energy solutions company, sold its water and wastewater treatment assets to Lummus Technology.

New Funds

NGP Energy, an Irving, TX-based energy investment firm, raised $1.2B across two funds focused on the energy transition and mineral rights and royalties.

Spicewood Mineral Partners, a Dallas, TX -based investment firm, held a first close of $120M for their second energy fund.

E2 Capital and Lion’s Head Global Partners, held a first close of $48.1M for their E3LCEF fund that backs African-based climate tech startups.

Share deals and announcements with us at [email protected]

In the News

The debt ceiling talks brought promising bipartisan support for energy permitting reform. Trading an eased transmission-building process in exchange for GOP adjustments to NEPA could be a huge boon to clean energy deployment in the US.

Global investment into solar power is projected to surpass that of oil production this year, with $1.7 trillion of forecasted spend for solar and $1 trillion for fossil fuels.

Major insurers continue to drop out from the Net-Zero Insurance Alliance (NZIA). AXA, SCOR, and Allianz are the latest to leave the alliance due to continuing ESG backlash in the US and US politicians claiming the group is unfairly hitting the oil and gas industry.

Lula administration to set tougher climate targets in Brazil, adjusting previous baseline from the Bolsonaro administration.

California’s grid operator (CAISO) unanimously approved a $7.3B transmission strategy, building out new high-voltage transmission to support up to an estimated 40 GW of renewables and storage projects.

The Supreme Court curtailed the EPA’s reach once more on Thursday—this time by redefining protected waters to exclude potentially half of all wetlands in the continental US.

Ford announces partnership with Tesla to double customers’ accessible EV chargers by using Tesla superchargers across North America, starting in spring 2024. Ford will begin producing EVs with compatible ports in 2025, eliminating the need for an adapter to use the superchargers.

The $1.2B Colorado river deal struck last weekend helps protect the shrinking water source, for now. See how the water source gets used today.

Power company Drax announced plans to spend $4B to build two new biomass plants in the US, taking advantage of the 45Q tax credit for CCS. Drax was under pressure last year for their biomass sourcing, particularly from primary forests in Canada, so we’ll see if this move adds to the sourcing scrutiny.’

This summer 67% of North America could experience blackouts. Paired with a heat wave, a blackout in Phoenix could leave half the city in need of emergency care for heat stroke—an extreme example today, but ⅕ of the world expected to live in dangerous heat by 2100.

Pop-up

Boeing CEO cools hopes for sustainable aviation fuels. Meanwhile, United CEO anticipates turbulent times for carbon offsets.

EV Pit Stops: Will Battery Swaps outrace traditional charging?

From whale oil to wind power.

Planet A’s primer to techno-economic assessments (TEA)

To achieve Paris Agreement targets, hydrogen electrolyzers must industrialize at a supercharged pace compared to past green technologies.

A “heat pump training lab” in Philadelphia aims to boost the number of heat pump installers as the city faces a hot market for the tech and considers equitable job transition of people installing legacy HVAC systems.

Activism in climate finance + deployment at scale done well = undersea cable dream. Billionaire Mike Cannon-Brookes will revive a stalled $20 billion plan to export solar power from Australia to Singapore.

Climate change causing dating dilemmas for Arctic Squirrels

European e-mobility startups on the move, mapped by Lakestar

Slowing ocean current speeds Antarctic ice melt

A sunspot 4x the size of earth draws concern as solar storms could threaten to knock out entire grids.

Opportunities & Events:

🗓️ FoodHack NYC Meetup: Join on June 8 for a discussion about advances in ag tech.

🗓️ LA Tech Week: Aerospace meets climate tech on June 8. Join Lowercarbon Capital, Arc Boats, Climate Draft, and Silicon Valley Bank to learn from aerospace experts now working in climate.

💡 OPF Academy: Learn from climate experts at organizations like Project Drawdown, Yale University, Patagonia, and more to level-up your sustainable business toolkit with OnePointFive. Early application ends June 11th.