Environment

Following COP26, more Asian corporations are looking for carbon offsets, according to industry executives.

Published on: 10 December 2021 11:05 AM
by KnowESG
Smoke rises from the chimney of a paper factory outside Hanoi, Vietnam May 21, 2018. Picture taken May 21, 2018.

A Brief Summary

Asia's demand for carbon offsets is picking up as more companies seek to lower their carbon footprint following the COP26 November Climate Pact, an industry official has said. Carbon offset instruments, such as renewable energy certificates (RECs), currently only account for a fraction of the global energy supply.

Singapore-based company T-RECs.ai has seen demand for 20 million RECs this year, equivalent to half of the city-state's power consumption. The company is stepping up efforts to get more renewable power suppliers in the region to register their credits. T-RECs.ai has registered RECs owned by TotalEnergies and China Envision Group, and is in talks with state utilities in France, China, Malaysia, and Thailand, Kang said.

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Following the COP26 November Glasgow Climate Pact, Asia's demand for carbon offsets is increasing as more corporations in global supply chains, IT, and finance strive to reduce their carbon footprint, according to the head of Asian market T-RECs.ai.

The hard-won Glasgow Climate Pact sent a clear message to global businesses that they needed to rethink their business strategies and carbon footprints if they wanted to reap financial gains, or they risked losing money.

As a result, demand for carbon offset instruments such as renewable energy certificates (RECs) is increasing, despite the fact that renewable energy sources now account for only a small portion of global energy production.

While offset products have been criticized for undercutting climate change efforts by allowing fossil fuels to continue to be consumed, they are seen as a feasible tool for corporations to reduce net emissions.

T-RECs.ai, situated in Singapore, has seen demand for 20 million RECs this year on its trading platform, which is equal to half of the city-power state's use, according to Kang Jen Wee, the exchange's creator, and CEO.

However, he stated that the platform was only able to meet the demand for 500,000 certificates. Each REC is equal to a one-megawatt hour of renewable energy produced.

"Supply is a constraint," Kang said, adding that the company was speeding up efforts to obtain additional renewable power producers in the region to register their credits.

Kang stated that the exchange aims to increase volumes to 10 million RECs next year and 100 million by 2025 and that it is in talks with potential partners to sell a 20% equity stake. He wouldn't say who the investors were.

RECs are purchased by corporations looking to offset carbon emissions from operations that use fossil fuels in the same country and produce additional money for renewable power plants.

Some of the customers are members of the RE100 program, which includes well-known brands like Apple, Danone, Alphabet's Google, and Nike.

HOW DOES T-RECS.AI WORK?

T-RECs.ai, one of eight companies approved by US registry APX TIGR to register and verify renewable energy certificates on behalf of renewable power generators, receives a fee once the certificates are sold on its platform, according to Kang, who founded the company in late 2018 with $100,000 from a blockchain venture capital firm.

T-RECs.ai has registered RECs held by TotalEnergies (TTEF.PA) and China Envision Group, and Kang said the company is in discussions with state utilities in France, China, Malaysia, and Thailand.

Multinational corporations are requiring their Asian suppliers to acquire RECs to offset carbon emissions, according to Kang.

He went on to say that the platform makes it easy for buyers looking for a variety of RECs from different areas, depending on where their operations are based.

According to Kang, the cost of each REC varies from $3 to $30, depending on where the electricity is generated.

Because renewable electricity is limited and demand is strong in Singapore, REC costs are at the top of the range, he added.

The software allows buyers to trace each certificate to the initial power plant source using satellite imagery, and it also scours public databases on a regular basis to enable tracking and prevent double-counting, he added.

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