The Role of Carbon Credits in Scaling Up Innovative Clean Energy Technologies
Summary
Achieving net-zero emissions by 2050 necessitates the rapid development and deployment of innovative low-emission technologies, such as low-emission hydrogen, sustainable aviation fuels (SAFs), and direct air capture and storage (DACS). According to the International Energy Agency (IEA) and GenZero, carbon credits can play a significant role in accelerating the adoption of these technologies.
Key Data Points
- Low-Emission Hydrogen: Production needs to increase from almost zero today to 70 million tonnes by 2030.
- Sustainable Aviation Fuels (SAFs): Their share of final energy consumption in aviation needs to rise from close to zero to around 11% by 2030.
- Direct Air Capture and Storage (DACS): Annual CO2 removals need to reach almost 70 million tonnes by 2030, starting from almost zero today.
Financial Needs and Mechanisms
- Investment Needs: Dramatic increases in investment are required, with governments playing a crucial role in unlocking this investment through a mix of policies and financing instruments.
- Public Finance: Domestic and international public finance will be essential, alongside private sector initiatives.
- Philanthropic Foundations: Partnerships with philanthropic foundations can target nascent technologies.
- Innovative Financing Mechanisms: New financial tools and mechanisms are being explored to support these technologies.
Role of Carbon Credits
- Low-Emission Hydrogen: Carbon credits can help attract private capital and accelerate the adoption of low-emission hydrogen.
- Sustainable Aviation Fuels (SAFs): Similarly, SAFs can benefit from carbon credits to drive investment and adoption.
- Direct Air Capture and Storage (DACS): DACS projects can leverage carbon credits to generate financial incentives for CO2 removal.
Barriers and Recommendations
- Current Challenges: The current low availability of crediting methodologies hinders the generation of carbon credits from low-emission hydrogen, SAFs, and DACS.
- Recommendations: A coalition of stakeholders should develop clear guidance on emissions accounting. Improved data collection on emissions is necessary to support these efforts.
Conclusion
Carbon credits have the potential to significantly accelerate the deployment of innovative low-emission technologies, but they cannot address the investment gap alone. Collaboration between governments, the private sector, and other stakeholders is crucial to create the right enabling environment for these technologies.
