Smart Energy Voices- Episode 49

Smart Energy Voices- Episode 49

The State of the Voluntary Carbon Offset Market, with Kyle Harrison

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In this episode of Smart Energy Voices, host John Failla had the opportunity to speak with Kyle Harrison about the state of the voluntary carbon offset market. Kyle is the Head of Sustainability Research at BloombergNEF. Over the last three years, Smart Energy Decisions has had the privilege of working with BNEF and Kyle on a variety of projects and events. You won’t want to miss Kyle’s interesting and valuable perspective.

You will want to hear this episode if you are interested in...

  • How do carbon offsets work? [03:49]
  • Overall trends in the sustainability market [08:04]
  • The future role of carbon offsets [12:19]
  • Guidelines for carbon offsets [14:05]
  • Current carbon offset trends [19:38]
  • The additionality of carbon offsets [28:15]
  • What role do consumers play? [30:50]
  • Kyle’s career progression [33:18]
  • What impact would Kyle like to have? [40:04]

What is BloombergNEF?

At the highest level, Bloomberg is a financial data provider. Bloomberg New Energy Finance (BNEF) is the market research arm of Bloomberg, specifically focused on the low-carbon transition. Kyle’s sustainability team focuses on markets and technologies. They look at the cost of solar and at power market dynamics across the United States. They also view the low-carbon transition through the lens of the private sector. Overall, Kyle and his team help companies understand ESG reporting and target setting. Once these plans are set, they provide research on how to finance and work towards achieving those targets. They help companies use strategies like stainable debt instruments or purchasing clean energy or carbon offsets to achieve a net-zero goal or other types of sustainability target.

Why do companies choose carbon offsets?

In many cases, carbon offsets are going to be the final mechanism that a company will use to address emissions they can’t reduce with any other method. For example, a company might look at clean energy and electrification, or they’ll change their business model and move away from oil into technologies like hydrogen or clean energy development. Once they’ve exhausted all those options, most companies will still see some residual emissions that they can’t reduce or remove, no matter what they do. That’s where there’s going to be an opportunity for carbon offsets. On the other hand, there will also be some companies that will take the easy way out from the start — they will dive right in and purchase millions of carbon offsets quickly to meet a carbon-neutral or net-zero target, at least in the interim. There will be a range of strategies for companies in the decarbonization spectrum.

The future of carbon offsets

There’s a bit of a divide between companies regarding how they view the additionality of carbon offsets. A lot of companies value the opportunity to buy carbon offsets over the counter. In this way, they can log directly into a bilateral emission reductions purchase agreement with a carbon offset project and buy those offsets long-term. Theoretically, that allows the project to get financed and therefore built. However, this requires a lot of expertise. There’s not a blueprint for carbon offsets like there is for PPA, and many companies don’t know what they’re getting themselves into when they enter the market. Some companies, instead, would love to purchase carbon offsets from an exchange.

Kyle has confidence in the growing prominence of carbon offset exchanges as more companies enter the market. The demand is too great to be satisfied through bilateral contracts alone. A faster, more liquid form of transaction is needed. The future will bring a lot more infrastructure to make the carbon offsets market look more like a commodities market. Kyle expects that the price for carbon offsets of all types will rise significantly over the long term and that they will increase more quickly for removal offsets than avoided offsets. Nonetheless, both of those parts of the market will be much more expensive a couple of years down the line than they are today.

Resources & People Mentioned

Connect with Kyle Harrison

Head of Sustainability Research, BloombergNEF
Kyle leads BNEF’s sustainability research team, which publishes content on the private sector's transition to the low-carbon economy. The team focuses on core areas like environmental, social and governance (ESG) reporting, target-setting, low-carbon pathways, and sustainable finance. Kyle specializes in corporate clean energy procurement, net-zero targets, and voluntary carbon offsets.

 

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