Insetting doesn’t have to be upsetting. How carbon units can help to decarbonize supply chains

by Bertil Duinhower, CEO and Co-founder, CarbonLeap

There is no quick and easy solution that all companies can implement to decarbonize their supply chains. Not every owner-operator can afford to invest directly in proven technology to reduce emissions from their vessels. Zero-carbon alternatives to hydrocarbons are not widely available across transport networks, making it difficult to switch to using technology that supports them. For manufacturers, retailers, and their shippers, using alternative clean energy sources for heavy road and marine transport in their supply chains could help them cut emissions. Yet, today, these are too frequently difficult to access, in the wrong place, or too expensive for a single operator to develop on their own.

Faced with this challenge, efforts by forward-looking operators to find ways to reduce the carbon footprint of their supply chain operations have run into two problems. First, there is a credibility gap, where stakeholders simply do not believe the claims made of effective decarbonization. Second, there is a barrier to wider action on decarbonization by the whole industry at a scale that could be effective.

Sharing the costs & benefits

Decarbonizing supply chains needs to move forward more quickly, but the limited availability of clean energy for transport has hampered progress so far. Carbon insetting offers a way for the sector to work together and share the costs and benefits of action on decarbonization. Carbon credits that are secured in their own (or an adjacent) supply chain offer cargo owners and shippers an effective and low-cost way to lower their net carbon emissions and progress their energy transition. However, trust and transparency are essential to the success of this system.

Carbon insetting creates a mechanism to share the responsibility and cost of decarbonization across the market so that investments in technology and fuel can be made where they are the cheapest. Businesses that have invested in technology can monetize the carbon reductions they have achieved over and above their statutory obligations and corporate objectives by selling them as carbon credits. This reduces the cost of their investments, allowing the customer to claim emission reductions in their supply chain.

As part of a market in voluntary carbon credits, insetting can be a highly efficient route to decarbonization that allows organizations to support the reduction of their scope 3 emissions. But, it is essential that businesses buying monetized carbon reductions can trust that the carbon units they purchase are verified, well-sourced, and do not double-count reductions. The carbon units need to be credible, offering value for money. Without these assurances, customers will reject carbon insetting as an approach, reducing investment available to first movers and hampering progress towards decarbonization.

Choosing in confidence

Carbon units must be independently and transparently verified, assured and witnessed by a third party. In addition, such a verification process should be standardized to transparent and universal rules to ensure carbon units are assessed to the same standard in the same way. For many carbon units, however, this isn’t the case.

Simply creating the carbon unit for someone to invest in is a hugely complex process. For buyers who want to be able to compare carbon units from different suppliers and be confident that they are getting what they pay for, sourcing and buying carbon reductions can be daunting. At CarbonLeap, we recognize this challenge for buyers; by making carbon units more transparent, we aim to simplify a complex process and help businesses drive forward their decarbonization ambitions.

A standardized set of rules for verifying carbon units would bring greater transparency to the market. It would reduce the information asymmetry between the suppliers of carbon units, low-carbon energy suppliers and users of clean technologies, and the buyers of carbon units who want to reduce their environmental impact. While suppliers of carbon units will have invested in technology to cut their emissions, accurate verification of the carbon reductions achieved, measured against a standardized counter factual baseline, is essential for building trust and transparency in carbon units.

Carbon units need to be packaged and securitized to allow customers to trust that they are getting value for money. At CarbonLeap, we connect the supply and demand sides of the market, helping to build trust across the parties. Our team of experts act as intermediaries, supporting the supply of carbon units by applying their knowledge, specialization and skill to identify and build a deep and wide network of carbon unit suppliers from among the global transport industry. We have built a network of carbon unit suppliers that includes clean energy suppliers and clean technology OEMs, as well as shipowners, freight forwarders, cargo owners and vessel charterers. Working with independent experts to provide verification and assurance of the carbon saved by each of these suppliers, we have created a pool of carbon units that the buyers we work with can choose from in confidence. Our independence in this process is an important part of our ability to work with all parties to bring affordable carbon units to market that help facilitate the energy transition.

Tech-secured

Our knowledge of high-quality carbon units available in the market means we can securitize carbon units and provide reassurance to buyers, who may have limited time and resources to research for themselves, that they are not paying exaggerated prices for their carbon units.

It is important that carbon unit buyers make sure that the price they pay and the volume of carbon units they purchase are accurate and verifiable. This can be a complex process. At CarbonLeap, we have recruited blockchain to make this simpler and more reliable by providing a secure digital record of your transaction from end to end.

All carbon unit transactions we complete for our clients are recorded using blockchain-enabled technology in an unalterable and transparent ledger, which means the emission reductions that a carbon unit represents cannot be duplicated. The units are delivered to the buyer in a secure digital transaction, and a certificate for proof of reduction is issued, helping to build trust and confidence in voluntary carbon markets and the use of carbon units from insetting.

Faster and at a lower cost

Carbon insetting allows companies operating in related supply chains to collaborate to realize a faster and lower-cost route to decarbonization. Globally, transport relies on fossil fuels for over 90% of its energy. For the sake of the planet, we must act now to reduce transport’s carbon footprint.

CarbonLeap is working with suppliers, buyers, and independent verifiers to bring essential accountability and transparency to the market. By creating confidence that carbon units are fairly priced, we can carry forward the fight against climate change more quickly.

Seeking to reduce your scope 3 emissions? Look no further, as CarbonLeap is committed to guiding you through this journey. We will work closely with you to understand your specific needs and align them with appropriate sustainability solutions. Our strategy involves collaborating with a network of partners who facilitate CO2 reductions in parallel to your supply chain. The beauty of this approach? You benefit from these carbon savings without needing to alter your operational processes. Go to carbonleap.nl to learn more.