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Emissions, companies testing new green strategies

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Emissions, companies testing new green strategies

The path towards sustainability of a company starts from the calculation of its emissions. As part of the strategy to achieve climate neutrality, and only after having tried to minimize its direct and indirect emissions, the company could decide to purchase carbon credits: a tradable financial instrument that represents one ton of CO2 equivalent avoided, absorbed or removed from the atmosphere through environmental mitigation projects certified by international bodies. A system sanctioned by the Kyoto protocol which, according to data from the World Bank’s State and Trends of Carbon Pricing 2022, exceeded one billion dollars in 2021 (+190% on 2020) and which, according to McKinsey, could reach 50 billion in 2030.

Once the carbon to be offset has been calculated, the company purchases the equivalent quantity of credits through brokers, specialized companies or by contacting those who are carrying out the project, and draws up a contract – the emission reductions payment agreement (erpa) – to account for the exchange and be able to declare that your product or service is carbon neutral. But what happens if the carbon credits calculated through the widespread conservation projects of tropical forests (the Redd+) and certified by one of the leaders in the sector, Verra, are questioned – in the recent Guardian, Die Zeit and Source Material ? According to Rete Clima, a non-profit that promotes corporate social responsibility and circular economy projects, the report should be read as a contribution aimed at improving the existing model and does not question it entirely. «To perfect the methodology, the monitoring period can be reduced from ten to six or five years, in order to better represent the changes in the context linked to socio-economic and political scenarios; experimenting with models that can better predict and quantify project interactions on the biodiversity side and social impact; bring together the Redd+ projects under a single methodology, to obtain consistency and a better comparison», explains Salvatore Coco, origination & portfolio manager of Rete Clima.

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“There is a lot of attention on the subject by companies and investors, who evaluate the target companies according to ESG parameters before making any type of investment”, explains the lawyer Vincenzo La Malfa, partner and head of the energy sector in Italy of the international law firm Dla Piper – which has already supported some international clients in carbon credit trading transactions. The lawyer points out that these are financially interesting operations: the average value of the certificates ranges from eight euros to 25 per ton and translates into the valorisation of forests and agricultural areas in mainly developing territories.

«The European emissions trading system (the Eu Ets, whose reform is in its final stages, ndr) has created a well-regulated market that is functioning; voluntary carbon credits could lend themselves to problems related to the fact that they are not recognizable through a single register that contains the projects in which it is possible to invest in order to obtain credits, despite the fact that various requests have been presented in Italy over the years . In this context, the position of the Gold Standard certifier, who is working on a project for the tokenization of carbon credits via blockchain, is interesting”. Looking at Italy, La Malfa also underlines the opportunity to create “in-house” projects from which credits can emerge. Like “carbon farming”, a practice of carbon sequestration in the land that can translate into a source of income for farmers, provided they practice regenerative agriculture.

Paolo Viganò, founder and ESG manager of Rete Clima, lists three reasons why most of the carbon credit generation projects are outside the EU and proposes a hybrid model: «European countries already account for the CO2 absorption of many of their surfaces nationals in their national ghg inventory, posing problems of double counting in the case of an exchange of carbon credits between private individuals; for historical reasons, more robust certification standards such as Verra and Gold Standard apply only in developing countries; generating carbon credits in Western countries has higher costs. We think that today it is optimal to balance foreign projects, with voidable carbon credits, and national interventions, which cannot largely be converted into credits until Italy creates a national register in which to account for those linked to additional activities”.

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