Three new business models to achieve CO2 reduction targets


NORTHAMPTON, MA / ACCESSWIRE / September 23, 2022 / Tetra Tech: Rodrigo Chaparro, senior climate advisor at Tetra Tech, views three cooperative approaches as a market-based path to net zero ahead of the 2022 United Nations Climate Change Conference (COP27).

This is the second in a three-part series exploring how Article 6 of the Paris Agreement can drive the clean energy transition.

The most recent report from the Intergovernmental Panel on Climate Change (IPCC) indicates that approximately 2,400 gigatons (Gt) of net CO2 From 1850 to 2019, emissions were generated worldwide. More than 1,000 Gt (42 percent) took place in the past 30 years.

We can only afford another 500 Gt in the next 80 years if we want to limit global warming to 1.5°C by 2100. This target seems unlikely given the current emission reduction commitments laid down in Nationally Determined Contributions (NDCs) ).

“Our best hope for far-reaching emissions reductions lies with the energy sector. Cooperative approaches offer a market-oriented path forward.”

Our best hope for far-reaching emission reductions lies with the energy sector. Countries need to reduce or eliminate fossil fuels, deploy low-emission technologies, switch to alternative energy sources and prioritize energy efficiency. They also need new business models that reduce CO . support2 reductions, such as the cooperative approaches defined at the 2021 United Nations Climate Change Conference (COP26) in Article 6(2) of the Paris Agreement.

Developed countries are interested in using the cooperative approaches to provide additional CO. to acquire2 emission reductions. Developing countries will benefit from receiving technical assistance and the transfer of precious advanced technologies that will help them meet the conditional targets set in their NDCs. The cooperative approaches provide a market-based path forward and can take many forms, including the three models described below.

Model 1 Joint Credit Mechanism

Japan has established the Joint Crediting Mechanism (JCM), a pioneering Article 6 project-based option to work with developing countries on greenhouse gas reduction and sustainable development. Japan is working with 17 partner countries under the JCM to facilitate the adoption of leading low-carbon technologies. The resulting emissions reduction from each project is assessed as a contribution from both the partner country and Japan and provides a tradable credit.

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Each country is committed to keeping records, issuing credits in a timely manner and refraining from using JCM mitigation projects for other international climate mitigation mechanisms to avoid double counting. The goal of the JCM is to achieve a cumulative reduction in GHG emissions of 100 million tons of CO. reach2e by 2030.

Through the JCM, the Thai company, SNC Former Public Company Limited, installed 3.4 megawatts of rooftop solar power in six plants that produce air conditioning components. The project uses highly durable crystalline silicon photovoltaic modules produced by Sharp Energy Solutions, a Japanese company with stricter standards than those of the International Electrotechnical Commission. The solar energy displaces electricity generated by fossil fuel-based power plants, helping to reduce greenhouse gas emissions. The participants jointly determine the distribution of verified credits generated by the project and can allocate part of the credits to their respective countries.

The Japanese Ministry of the Environment partially supported the project in this case, with the aim of understanding the operational aspects of the mechanism, acquiring JCM credits for the Japanese NDCs and promoting the transfer of low-carbon technologies. Both the Japanese technology manufacturer and the Thai company benefit, thereby achieving net greenhouse gas emission reductions.

Most JCM projects are related to renewable energy and energy efficiency, but there are also some waste-to-energy and transportation projects. As more countries adopt cooperative approaches, the diversity of projects, types of support and partnership models could expand into areas such as electromobility, green hydrogen and advanced technologies where utilities can play an important role. The current phase is key to building the necessary infrastructure in developing countries so that cooperative approaches can work smoothly.

Model 2 Utility-Transport Partnerships

Companies such as Enel X are leading partnerships using models that offer financing, intelligent charging solutions and green certificates. Enel X’s successes include the delivery of six electrical terminals and 401 electric buses in Bogota, Colombia, and 11 electrical terminals, 40 smart bus stops and 245 chargers in Santiago, Chile.

Global utilities could use the Article 6 carbon market mechanism to develop an entirely new business model that links the know-how of electric utilities with local public transport companies and companies launching electric transport fleets.

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The scheme can be used on a global or regional scale as it is also structured to promote South-South cooperation. For example, a foreign or regional utility company could contract with a local bus concessionaire to build or finance a renewable energy plant that will provide clean electricity and the required charging infrastructure. In return, the utility would provide a portion of the CO. can receive2 emissions reductions associated with the project, which that utility’s country can use to meet its NDC targets. This type of agreement also helps to share project risks and facilitate access to finance.

Model 3-Utility-Green Hydrogen Partnerships

The hydrogen supply chain is critical to developed economies in achieving decarbonisation targets, especially in light of the expected steady increase in carbon taxes. The driving forces behind the growth of the green hydrogen market include concerns related to the security of fossil fuel supplies, the reduction of renewable energy costs and the ability of hydrogen to increase demand-side flexibility through storage applications. The market is projected to reach $417.5 million by 2028, up from an estimated $223 million in 2022.

In advanced economies, green hydrogen can play a role in the clean energy transition as an enabler for the integration of a greater share of renewable energy in the energy sector. It also supports sectors struggling to become decarbonised, such as trucking, aviation, shipping, heating and other energy-intensive industries. In most developing countries, green hydrogen is not seen as a competitive energy source in the short term, but it can certainly become a valuable export product.

“A cooperative approach could be used to facilitate the international deployment of technology, provide favorable climate finance to investors and structure the exchange of carbon credits.”

Utilities are also exploring new international avenues with green hydrogen. The Haru Oni ​​pilot project in Chile will harness the strong winds of Chile’s Magallanes region to produce green hydrogen that will be used to make a synthetic fuel for export. The project combines the experience of an Italian utility subsidiary of Siemens, an oil company, and German car manufacturer Porsche, which will use the fuel in its motorsport fleet. A cooperative approach could be used to facilitate the international deployment of the technology produced in Germany, provide favorable climate finance to investors and structure the exchange of carbon credits.

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Most CO2 emission reductions would be transferred to Germany. Chile would benefit not only from hydrogen exports, but also from introducing more renewable energy into the grid.

Thinking up new models for the new normal

As leaders in decarbonisation, many energy and utilities companies are looking to reinvent themselves by experimenting with new business models that serve the energy transition and its outcomes. While the details of partnerships between sectors and countries are diverse, there is a common thread running through planning, innovation and international cooperation. The cooperative approaches can play a central role in these initiatives by also facilitating access to new technologies, climate finance and carbon trading.

How can Tetra Tech help customers adopt cooperative approaches?

Tetra Tech’s energy consulting and technical implementation experts can support governments and private sector customers in the following areas.

Developing new carbon markets

  • Advising governments on energy project regulation under cooperative approaches and the Sustainable Development Mechanism (SDM) (e.g. project suitability, compensation mechanisms, financing, monitoring and verification, legal advice)

  • Build clean energy portfolios with carbon offsets that can be traded internationally through the cooperative approaches and SDM markets

  • Ensure carbon market compliance and maximize the potential to reduce emissions reduction costs

Design and implement decarbonisation pathways for utilities and private companies

  • Analyze the market and identify low-carbon financing and investment opportunities

  • Deploying the technology needed to execute decarbonization strategies

  • Assess quality offsets that can complement emissions targets, with services such as screening projects, conducting financial and commercial due diligence, and negotiating with property developers

Read more from Rodrigo on how Article 6 of the Paris Agreement can drive the clean energy transition:

Tetra Tech, Friday September 23, 2022, Press release photo

See additional multimedia and more ESG stories from Tetra Tech at

Contact information:

Spokesperson: Tetra Tech
Email: [email protected]

SOURCE: Tetra Tech

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