“Race to Zero” is the UN-backed global campaign rallying non-state actors – including companies, cities, regions and financial and educational institutions – to take rigorous and immediate action to halve global emissions by 2030 and deliver a healthier, fairer zero carbon world in time.1 Members are committed to the same overarching goal: reducing emissions across all scopes swiftly and fairly in line with the Paris Agreement, with transparent action plans and robust near-term targets.
As of early 2021, at least one fifth (21%) of the world’s 2,000 largest public companies had committed to meet net zero targets.2 The companies together represented sales of nearly $14 trillion. However, to keep global warming to no more than 1.5°C as called for in the Paris Agreement, emissions need to be reduced by 45% by 2030 and reach net zero by 2050. Strong action plans need to be put in place to meet these ambitious goals.
Global emissions at this large manufacturing company stood at approximately 20 million metric tons (MT) in 2021. The company plans to reduce its total emissions to 6 million MT by 2030 and offset this amount to become a net zero emissions company within the decade. The aim is to offset mainly with forestry projects and then with soil carbon sequestration projects.
Pain Points
ESG performance is becoming more transparent as disclosure and reporting takes hold and is increasingly being used to evaluate a company’s potential as an investment option. Given the nature of this manufacturing business, members of the corporate ESG team recognized the need to obtain carbon credits in order to meet the company’s net zero goals. For this to be effective, it was important to have access to:
- Insights on carbon market developments around the world.
- A comprehensive picture of prices that capture individual attributes of particular projects, including standard certification, volume, vintage and geography.
- Credible offset projects that are validated and verified to the highest standards.
- An auction platform to view and bid on available offsets, see final prices and have electronic position settlement.
- Registration capabilities for carbon accounts in different markets, with easy online access to see credits available for sale, along with indicative quantities and prices.
- Credit tracking from issuance to transfer to cancellation or retirement.
The company was a long-standing client of S&P Global Market Intelligence for credit risk solutions and knew that IHS Markit was now part of the group. It was suggested that the team meet with S&P Global Sustainable1 (“Sustainable1”) to discuss the firm’s extensive capabilities in the carbon market arena. Sustainable1 brings together capabilities from across the enterprise to serve as a single source of essential energy transition intelligence.
With the push to transition to a low-carbon economy, this ESG team saw carbon offsets as a viable option to help decarbonize the business and achieve the company’s stated climate goals.
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The Solution
Specialists from Sustainable1 spoke to members of the ESG team about their net zero goals and desire to offset emissions. They then described a number of carbon-specific capabilities, including solutions from:
- S&P Global Commodity Insights. As of March 2022, IHS Markit became part of S&P Global, and S&P Global Platts and IHS Markit Energy & Natural Resources combined to become S&P Global Commodity Insights.
- S&P Dow Jones Indices.
- Trucost, the data and analytics engine of Sustainable1.
Together, these capabilities would enable the company to:
Assess greenhouse gas emissions
Carbon Footprinting helps company’s understand their organization’s carbon footprint and underlying sources of carbon emissions – as well providing forward-looking metrics on their exposure to physical and transition climate risks.
Carbon Earnings at Risk Dataset assesses company-level exposure to current and future carbon pricing scenarios. Integral to this analysis is the Unpriced Carbon Cost, which is defined as the difference between what a company pays for carbon today and what it may pay at a given future date based on its sector, operations and under different climate change scenarios.
Physical Climate Risk Dataset helps assess company exposure to seven climate-related hazards (sea-level rise, flooding, heatwaves, coldwaves, drought, hurricanes, and wildfires) under low, medium and high climate change scenarios. Over 2.7 million assets are mapped to over 15,000 listed companies, with risk metrics provided from a 2020 baseline to 2030 and 2050.3
Stay on top of breaking carbon news
Latest news and market commentary across the global carbon markets provides real-time insights on what is moving global carbon markets to support informed decisions in today’s fast-changing environment. A diverse range of topics are covered, including technological breakthroughs, changes in regional pricing patterns, global trading opportunities, the strategies of global and regional companies, the intricacies of policy and regulation in producing and consuming nations, key asset announcements and more.
Emissions Market Analysis covers the latest news coming out of the compliance and voluntary carbon markets across the globe This includes specific details on the short-, medium- and long-term outlooks for the compliance markets in each region to help organizations actively cover their positions and understand fundamentals in these markets.
Gain additional market context
Global Integrated Energy Model (GIEM) provides users with a tool to study the evolution of the global energy system. Containing all components of integrated balances, GIEM is used to compute long-term energy demand under various scenarios, providing a broad view in which to assess fossil fuels.
Track price developments in compliance markets
Carbon Allowance Price Assessments for the compliance market involve evaluations of OTC forward prices for December European Union Allowances (EUAs) and United Kingdom Allowances (UKAs), which are financial instruments used in these two trading schemes. The assessments are complemented with extensive news coverage.
Low Carbon Fuel Standard Credit (LCFS) Price Assessments are published daily. Producers of petroleum and diesel are purchasing these credits from producers of ethanol, bio diesel, hydrogen and electric charging to meet their deficit shortcomings.
California Offsets Price Assessments look at physically delivered GHG emissions offset credits that are limited to emissions-reduction projects in the U.S. and specifically to five areas: forestry, urban forestry, destruction of ozone-depleting substances and mine methane capture.
Regional Greenhouse Gas Initiative (RGGI) Price Assessments look at the cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia to cap and reduce CO2 emissions from the power sector.
Track price developments in voluntary markets
Voluntary Carbon Market Price Assessments cover a full range of different projects using a market-appropriate pricing methodology and assessment criteria. The assessments reflect bids, offers and trades as reported in the Commodity Insights Market on Close assessment process, the brokered market or on trading and exchange instruments. The assessments reflect the individual attributes of particular projects and factor in standard certification, volume, vintage, region, co-benefits and geographic location.
The market is segmented into avoidance and removal credits, and price assessments are provided for several project types. Avoidance projects include Household Devices, Industrial Pollutants and Nature-Based. Removal projects include Tech-Based and Natural Carbon Capture. Individual daily spot assessments are published for each type of project, and then the most competitive assessment sets the category for the day.
Additional assessments reflect credit types, including carbon credits eligible for the International Civil Aviation Organization’s CORSIA program, methane collection carbon credits that avoid or reduce GHG emissions and carbon credits from renewable energy projects.
Carbon Credit Settlements and Assessments data leverages Commodity Insight’s partnership with the Xpansiv spot-market and CME futures exchanges. Commodity Insights publishes daily assessments and settlement prices for the Xpansiv carbon credit spot market contracts using market data directly from Xpansiv CBL. In addition to providing settlements for spot markets, Commodity Insights provides the settlement prices for the physically delivered CME CBL futures contracts for 48 forward months at the 2:30pm New York close. Market reporters assess these settlements using bids, offers and transaction data directly from the NYMEX exchange.
Evaluate potential price appreciation
The Global Carbon Index was launched by IHS Markit together with Climate Finance Partners (CLIFI) as a first-of-its-kind index that tracks the underlying assets of the most liquid compliance carbon markets: EU ETS, the California Cap-and-Trade system and RGGI.
The S&P GSCI Carbon Emission Allowances (EUA) is designed to measure the performance of the European EUA market.
CARBEX Carbon Credit Indices are published in partnership with Viridios AI. The six indices reflect the value of different types of voluntary carbon credits and enhance market transparency in the complex voluntary carbon credit and co-benefit markets. Co-benefits are terms attached to carbon credits that provide evidence of meeting the 17 Sustainable Development Goals (SDGs) defined by the United Nations.
The S&P GSCI Global Voluntary Carbon Liquidity Weighted is the first-to-market benchmark for the current performance of global voluntary carbon futures markets. The index is very flexible and constituents can easily be added or removed at regular intervals to ensure that the index reflects the rapidly changing carbon environment.
Participate in auctions
Auction Platform is used by jurisdictions to provide comprehensive auction services across over-the-counter (OTC) asset classes. The platform seamlessly connects all auction participants, including bidders, registries, auction monitors, regulators and other program stakeholders. Entity account representatives of qualified bidders submit bids at the date and time identified in the event notice. With transparent rules for each auction, the market determines a clearing price via an equitable buying/selling mechanism.
In addition, a centralized, online platform enables auction participants to share and disseminate documentation. Participants can upload, review and track key documents and receive automated notifications of any changes to the materials.
Register and track carbon credits
Environmental Registry is a secure online platform for organizations setting standards and enables companies and others to manage all their global carbon credits in a centralized, financial markets-based system. The registry provides unique serial numbers and credit tracking. In addition, credits are searchable and viewable by registered buyers who can send expressions of interest. Buyers may also enter specific criteria for credits that they wish to purchase. Introduction through the platform enables the parties to discuss potential bilateral transaction terms.
Users can also track forward sales of anticipated credits with the ‘pending issue unit’ (PIU) tool. Each PIU represents an anticipated credit to be delivered based on a specified standard compliant project validation report. These anticipated units can be listed, serialized, held and tracked on the registry.
A project management dashboard lets users easily monitor and forecast the status of projects and issuances.
Leverage a centralized access point for data and news
Dimensions Pro supports advanced charting, personalized dashboards and watch lists, plus access to price assessments and indices for compliance and voluntary carbon markets, market commentaries and news.
Key Benefits
Members of the ESG team thought this comprehensive set of data and tools for the carbon markets would enable them to better understand this quickly evolving space and identify appropriate projects for their offset plans. They subscribed to the capabilities discussed and now have access to:
- Information to determine their current emissions levels and set goals to reduce them over time.
- Relevant insights into the trends that shape carbon markets across a large range of project types, geographies and standards.
- Carbon price assessments that reflect projects certified by established entities: The Gold Standard, Climate Action Reserve (CAR), Verified Carbon Standard (VCS), Architecture for REDD+ Transactions and American Carbon Registry (ACR).
- Well-tested and secure registry platforms with extensive functionality to efficiently manage carbon credits.
- Auction capabilities backed by a leading provider that has recognized expertise in collecting, processing and distributing content in the carbon and water marketplaces.
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2 “Taking stock: A global assessment of net zero targets”, Energy & Climate Intelligence Unit, https://ca1-eci.edcdn.com/reports/ECIU-Oxford_Taking_Stock.pdf?v=1616461369
3 Data as of January 2022.