Table 1


In terms of the regulatory drive, for as much as the EU’s Corporate Sustainability Reporting Directive (CSRD), and the International Sustainability Standards Board (ISSB) ‘exposure drafts’ now provide high-quality standards, and there has been alignment between the two in terms of major concepts and requirements, complete interoperability between the two looks to be unlikely. Adhering to either in terms of developing and maintaining organizational capacities will inevitably carry very material additional operating costs, and many companies across the value chain in agricultural and energy (and more broadly) will be subject to both, even if this does not mean doubling the workload. It should be added that this burden will be proportionately that much higher for small and medium sized companies, be that in processing and production, or trading. The latter imparts an even greater need for collaboration not only between developed and developing economies, but also larger between larger companies and SMEs, and not just those in their immediate supply or value chains,


But as was pointed out by numerous speakers, there is a more acute need to ‘learn to walk before we can run’, in so far as there are an array of complex challenges in emissions monitoring. These include the lack of standardized methodologies in emissions measurement, numerous difficulties in data collection, perhaps above all traceability, and then how to integrate the array of sustainability data into trading systems with minimum disruption. As one farmer noted, there is a clear willingness for farmers to collect and provide the so-called ‘primary’ data, but how that data is deployed by stakeholders further along the value chain is even more critical, for example in estimating SME emissions for the purpose of evaluating the carbon footprint of bank loan portfolios. The widespread criticism of the Voluntary Carbon Market (VCM) serves as a good example of where many of the challenges lie, given the frequent lack of robust quality controls, formal obligations, transparency or indeed regulatory oversight, which in turn facilitates often overstated claims about climate actions.


Source: Carboncredits.com


Indeed, many of the forestry projects financed by the VCM are neither effective on a large-scale basis, or over the longer term in terms of emissions reduction. As such it is little surprise that there is an enormous gulf in carbon pricing in ‘Compliance Markets’ as against VCM, as can be seen in the table, which also serves to highlight the divergence across geographical regions, in no small part reflecting differences in the level of regulatory pressures (Chart 1).


But as many speakers noted, this also attests to higher level issues in the drive to reduce emissions. The current price of carbon is simply too low in terms of incentivizing a shift in the balance of actions being undertaken from Net Zero to absolute Zero, aka moving from ‘offsetting’ to ‘insetting’. It should be stressed that this is about the overall balance, at the same time recognizing the Energy Trilemma, namely ensuring Reliability, Affordability and Sustainability, as well as Security. Clearly there are many hurdles to overcome, but not taking action now either due to uncertainty about how the regulatory landscape may evolve, or indeed ‘fear of failure’ runs the even bigger risk of going out of business in the future, due to insurmountable regulatory and operational hurdles.


As I have previously noted: my most enduring impression is that with funding, upscaling and feedstock / resource challenges, as well as the pressing need to decarbonize as quickly as possible, then surely much more effort should be made to look at those areas where retro-fitting and repurposing can be achieved quickly and (relatively) affordably, above all with the help of CCS technologies. Eminently purists reject this as a slippery slope to lowering targets. I personally would counter that if the short-term targets are set too high and unrealistic, then the bigger risk is of a total market failure with highly damaging, if not fatal consequences. The low hanging fruit of what is achievable should be encouraged and seized with vigour, but it should also not impede the advancement of longer-term goals.


Marc Ostwald E: marc.ostwald@admisi.com T: +44(0) 20 7716 8534


17 | ADMISI - The Ghost In The Machine | Q4 Edition 2023


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