Carbon Pricing Meets Web3
01.28.22
Happy Friday! On a roll here and keeping it going.
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Carbon Pricing and Web3
Carbon pricing has definitely been my pet project this week, especially where this already-illiquid market is meeting the forces of web3.
An evolving carbon pricing market has the power to influence the economics of large projects - both driving value towards those that produce carbon credits, and raising the price of infrastructure and ‘net zero’ commitments that rely on purchasing these credits in the open market.
In the story below, using updated carbon prices increased the price for the project to 623m pounds from 502m.
With carbon prices generally on the rise, this could come into play more often - especially if the US gets in on the act.
“…the increase in carbon values — the central price rose from £77 to £245 per tonne of carbon — meant the environmental impact of these projects had been “dramatically underestimated”
+Higher cost of carbon emissions threatens UK airport expansion plans - FT
Klima DAO
KlimaDAO is using the power of web3 to drive up the price of carbon. They received some press a few weeks back due to involvement by Mark Cuban.
The DAO intends to buys carbon credits in the open market as well as encourages verified credit producers to submit theirs directly to the DAO. These credits will mostly be retired, which takes them off the market and leaves fewer for polluters to buy as offsets.
KlimaDAO uses the Toucan Protocol (referenced in a previous newsletter) to tokenize carbon credits.
To quote myself texting a friend interested in web3 earlier this week:
“DAO’s make my head hurt”
No further questions…
Shipping & Ports
“Maersk is skipping the natural gas transition and jumping straight to low-carbon alternatives like methanol; the company has ordered 12 methanol-powered cargo ships, set to be delivered starting in 2024, and it bought stakes in methanol suppliers to meet its fuel needs.”
A common theme in any energy transition discussion is the good ol’ chicken and egg issue. That is, how can next generation fuel suppliers build out infrastructure before there are customers, and how can customers convert to new fuels without reliable supply.
This shows how the larger companies can help push this through vertical integration and supply contracts.
While this ship order represents just 5% of Maersk’s cargo capacity, it is a necessarily step in getting the fuel transition rolling.
+Maersk could push the entire shipping industry to move up its climate goals - Quartz
“The partnership intends to work together to achieve these goals by developing a “Green Shipping Corridor Implementation Plan” by the end of the 2022 calendar year that will include deliverables, milestones, and roles for the partnership.”
The trans-pacific corridor is the busiest container shipping lane globally.
Shipping needs accountability
Unbelievably (and purposefully) complicated arrangements between ship owners, flag nations, operators, and crews under maritime law protect ship owners from the consequences of IUU fishing and crimes on high seas on their vessels.
Bringing in the registry of ships from outside nations would be a huge step in accountability and the ability to prosecute crimes.
“Fifty percent of the ships that traverse our international waterways are registered in just three jurisdictions – Panama, Liberia, and the Marshall Islands – where loosely enforced regulations and lack of due diligence and oversight has created enormous risk to the U.S. and global shipping industry and facilitated illicit activity on the high seas”
+US to get an open register based out of the Virgin Islands - Splash247.com
(Want to learn more? Read The Outlaw Ocean by Ian Urbina, and follow his journalism as well.)
Renewable Energy
While these stories aren’t targeting offshore wind in particular, a little perspective on the wind energy segment as a whole seems appropriate.
+China build more wind capacity in 2021 alone than the rest of the world in last 5 years
+China’s $60 billion wind empire needs to grow its own blades - Bloomberg
Energy Transition - The Electrification of Everything
More on Lithium
The deep dive into lithium continues…
“Its status as the “battery-of-choice” in EV markets stems from its superior performance across a mix of key variables which include high energy density (which translates to high electric power capacity), light weight, low volume constraints, operational safety, and scalable manufacturing.”
+Power play - why lithium remains the unchallenged champion of battery metals - Robeco
“Many funds will try to have some exposure to the stock, given its huge market valuation. It is a must-have stock for passive index funds, regardless of its valuation”
+Tesla battery maker LG Energy Solution surges on record market debut - FT
Of course, the statement above shows just one of the challenges of ESG and sustainability investing in the current environment. Also something to keep in mind about all of your passive investments in an overvalued market.
Lithium Prices Soar
“I just don’t see that there’s going to be enough supply of raw materials … and I think it’s going to be a massive bottleneck,” said Vance Brown, portfolio manager at Williams Jones Wealth Management.
+Lithium hits record in EV boom, spurring a land grab among miners - CNBC
While this story comes from earlier in the week, the chart below shows that the trend continued. The chart also shows how illiquid the lithium futures market is at this stage.
Food or fuel?
+Algae market potentially worth $320 billion draws Honda, Eneos - Bloomberg
Seafood
Vertical integration in seaweed
Whether it is Atlantic Seafoods here in the US, or Shore in the UK (story below), a common theme in the seaweed industry is that even the smallest companies soon find the need to vertically integrate - offering both a retail product but also access to their developing supply chains.
“The potential for seaweed is extraordinary, as it’s a crop that grows without fertilizer, fresh water or land.”
+The seaweed startup that’s growing places - The Fish Site
What is sustainable?
The seafood industry does a very careful job to make sure we equate fishing with some old white-bearded guy alone on a boat. In reality, commercial fishers are floating factories that we all pay for through subsidies.
It is political power on a level that puts energy companies to shame, yet generally flies under the radar.
“One-third of all fish stocks are overexploited, yet governments (you mean taxpayers?my insert) around the world provide $22 billion a year in subsidies that incentivize vessels to travel farther and catch fish faster, contributing to the destruction of marine ecosystems and threatening the food security and livelihoods of coastal communities.”
Additionally, “over 80% of the USD $35.4 billion of global fisheries subsidies provided in 2018 went to large-scale, industrial fishing fleets”
+How to sustainably manage wild fisheries - Stanford Center for Ocean Solutions
Additionally, almost half of that great garbage patch we all hear about is discarded fishing gear.
Are straws really the problem?
“Haven’t been seen for 25 years”.
What do you say we don’t go eating them just yet.
+Rains bring salmon back to California streams - The Guardian
Good news…
“Our Department is well aware of how important sharks are to maintain healthy marine ecosystems. And we recognize their importance for native Hawaiian cultural practices and beliefs.”
+Shark fishing ban goes into effect January 1 - Hawaii.gov
Sort of Good news…
The fact that this is Europe’s largest marine reserve is a bit sad. But I guess it’s a start.
The new reserve products approximately 1,000 square miles around the Selvagens Islands in the North Atlantic.
+Portugal creates Europe’s largest marine reserve - Treehugger
Blue Economy Jobs
Climateworks Foundation
Program Manager - Aviation Initiative
FishWise - Santa Cruz!
TraceabilityDialogue.org
Climate and Web3
Thanks for reading and sharing!
-D