1、The Role of Carbon Credits in Scaling Up Innovative Clean Energy TechnologiesHow high-quality carbon credits could accelerate the adoption of low-emissions hydrogen,sustainable aviation fuels and direct air captureThe IEA examines the full spectrum of energy issues including oil,gas and coal supply

2、and demand,renewable energy technologies,electricity markets,energy efficiency,access to energy,demand side management and much more.Through its work,the IEA advocates policies that will enhance the reliability,affordability and sustainability of energy in its 31 member countries,13 association coun

3、tries and beyond.This publication and any map included herein are without prejudice to the status of or sovereignty over any territory,to the delimitation of international frontiers and boundaries and to the name of any territory,city or area.Source:IEA.International Energy Agency Website:www.iea.or

4、gIEA member countries:AustraliaAustriaBelgiumCanadaCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNew ZealandNorwayPolandPortugalSlovak RepublicSpainSwedenSwitzerlandRepublic of TrkiyeUnited KingdomUnited StatesThe European Comm

5、ission also participates in the work of the IEAIEA association countries:Argentina BrazilChinaEgyptIndiaIndonesiaKenyaMoroccoSenegalSingapore South Africa Thailand UkraineINTERNATIONAL ENERGYAGENCYThe Role of Carbon Credits in Scaling Up Abstract Innovative Clean Energy Technologies PAGE|3 IEA.CC BY

6、 4.0.Abstract Achieving net zero requires rapid development of technologies such as low-emissions hydrogen,sustainable aviation fuels(SAF),and direct air capture and storage(DACS).The IEA and GenZero report explores how carbon credits can incentivise their deployment.Massive scaling-up is needed:low

7、-emissions hydrogen production needs to jump from almost zero today to 70 million tonnes by 2030;SAFs share of final energy consumption in aviation needs to rise from close to zero today to around 11%by 2030;and annual removals of CO2 via DACS need to reach almost 70 Mt CO2 in 2030,from almost zero

8、today.Investment must also increase dramatically.Governments can unlock investment through a mix of policies and financing instruments.Carbon credits can play an important role,especially in attracting private capital and accelerating technology adoption.Carbon credits cannot bridge the investment g

9、ap on their own,and governments and the private sector need to develop strategies to create the right enabling environment for investments.Moreover,the current low availability of crediting methodologies hinders the generation of carbon credits from low-emissions hydrogen,SAF and DACS,but the landsc

10、ape is shifting.A coalition of stakeholders should develop clear guidance on emissions accounting,and efforts to get better data on emissions are necessary to provide the foundation for such guidance.The Role of Carbon Credits in Scaling Up Table of contents Innovative Clean Energy Technologies PAGE

11、|4 IEA.CC BY 4.0.Table of contents Acknowledgements.5 Executive summary.7 1.Introduction.10 To shift onto a 1.5 C trajectory,the world must accelerate global clean energy investments,especially on key technologies.10 Carbon credits can help to catalyse investment in innovative low-emissions technolo

12、gies.11 Initiatives to strengthen environmental integrity and restore trust and transparency in carbon markets.16 2.State of play for low-emissions hydrogen,sustainable aviation fuels and direct air capture and storage.19 State of play for low-emissions hydrogen.19 State of play for sustainable avia

13、tion fuels.24 State of play for direct air capture and storage.27 3.Financing needs and mechanisms for nascent technologies.34 Investment needs and sources of finance.34 Role of domestic and international public finance.38 Private sector initiatives.39 Financing partnerships led by philanthropic fou

14、ndations targeting nascent technologies.40 Innovative financing mechanisms.41 4.Role of carbon credits in supporting adoption of nascent technologies.43 Low-emissions hydrogen carbon credits.43 SAF carbon credits.48 DACS carbon credits.55 5.Barriers and recommendations on the role of carbon credits

15、in scaling up low-emissions hydrogen,SAF and DACS.60 Annex.68 Abbreviations and acronyms.68 Units of measurement.69 The Role of Carbon Credits in Scaling Up Acknowledgements Innovative Clean Energy Technologies PAGE|5 IEA.CC BY 4.0.Acknowledgements This report was prepared by the Energy Investment U

16、nit in the Office of the Chief Energy Economist(OCEE)Division of the Directorate of Sustainability,Technology and Outlooks(STO)at the International Energy Agency(IEA)and GenZero.It was designed under the direction of Tim Gould,Chief Energy Economist and Head of OCEE at the IEA,and Frederick Teo,Chie

17、f Executive Officer,GenZero.Luca Lo Re(IEA)and Puar Si Liang(GenZero)led the design and co-ordination of the report.Other principal authors of the report were:Cecilia Tam(IEA finance),Ryo Yamasaki(IEA state of play of technologies),Anshari Rahman(GenZero carbon credits),Randall Perera(GenZero carbon

18、 credits),Edmund Siau(GenZero carbon credits)and Benjamin Sim(GenZero carbon credits).Edoardo Campo Lobato(IEA)provided valuable support throughout the report.Erin Crum was the copy editor.The report also benefited from input provided by numerous IEA colleagues,in particular Simon Bennett,Jose Migue

19、l Bermudez Menendez,Mathilde Fajardy,Carl Greenfield,Paul Grimal,Heeweon Hyun,Christophe McGlade,Jeremy Moorhouse and Uwe Remme.Additional thanks go to the IEAs Communications and Digital Office(CDO)for their help producing the report and website materials,particularly to Jethro Mullen,Curtis Braina

20、rd,Astrid Dumond,Therese Walsh,Poeli Bojorquez and Oliver Joy,and GenZeros Communications Team,Michelle Tan,Deanna Gan and Tan Shu Ning.Peer reviewers Many senior government officials and international experts provided input and reviewed preliminary drafts of the report.Their comments and suggestion

21、s were of great value.They include:Toshi H.Arimura Waseda University Arianna Baldo Roundtable on Sustainable Biomaterials(RSB)Adam Baylin-Stern Carbon Engineering Andrea Bonzanni International Emissions Trading Association Helen Bray Puro.earth The Role of Carbon Credits in Scaling Up Acknowledgemen

22、ts Innovative Clean Energy Technologies PAGE|6 IEA.CC BY 4.0.Benedict Chia National Climate Change Secretariat,Prime Ministers Office,Singapore Chua Han Wee Shell Kel Coulson Carbon Engineering Anselm Eisentraut Neste Julio Friedmann Carbon Direct Takashi Hongo Mitsui Global Strategic Studies Instit

23、ute Kelvin Lee International Air Transport Association(IATA)Lim Tuang Hin Civil Aviation Authority of Singapore Judy Meltzer Environment and Climate Change Canada Axel Michaelowa Perspectives Climate Group and University of Zurich Sohyeon Park Voluntary Carbon Markets Integrity Initiative Chen Fook

24、Ping Singapore Airlines Hugh Salway Gold Standard Eve Tamme Climate Principles Tae Tamura Mizuho Bank Louis Uzor Climeworks Paul Zakkour Carbon Counts The Role of Carbon Credits in Scaling Up Executive summary Innovative Clean Energy Technologies PAGE|7 IEA.CC BY 4.0.Executive summary The transition

25、 to global net zero emissions requires the rapid development and deployment of innovative technologies that are critical for decarbonising hard-to-abate sectors,such as industry,aviation and long-haul transportation.This report,prepared jointly by the IEA and GenZero,explores how carbon credits coul

26、d help scale up low-emissions hydrogen,sustainable aviation fuels(SAF)and direct air capture and storage(DACS).To align with the IEA Net Zero Emissions by 2050(NZE)pathway that limits the rise in global average temperatures to 1.5 C,all these technologies need a massive and urgent scale-up in deploy

27、ment.Low-emissions hydrogen production reaches 70 million tonnes(Mt)of hydrogen(H2)by 2030 in this pathway,from less than 1 Mt H2 in 2022.SAFs share of final energy consumption in aviation rises from close to zero today to around 11%by 2030.Annual removals of CO2 via DACS reach almost 70 Mt CO2 in 2

28、030,and some 700 Mt CO2 by 2050,again from almost zero today.Achieving the necessary scale-up of these technologies will depend on early deployment and investment.In 2023,the level of investment in low-emissions hydrogen,SAF and DACS was USD 9 billion.In the NZE Scenario,this needs to increase to ne

29、arly USD 300 billion annually by the early 2030s and reaches around USD 700 billion yearly by mid-century.Around 75%of these investments in 2050 would be required for low-emissions hydrogen and hydrogen-based fuels.To mobilise this level of investment,governments need to deploy a mix of complementar

30、y policies and innovative financing instruments.A blended approach of public,private and philanthropic funds could help manage different risks and lower the overall cost of capital.Limited public funds could contribute to manage regulatory and country risks to help bring in private capital in early

31、projects.In developing economies,blended finance can use grants or guarantees to support market entry and project feasibility.Governments could help to bridge the investment gap by providing clear regulations and enabling policies.High-quality carbon credits are a potentially important tool to furth

32、er incentivise investment and increase project revenues.High-quality carbon credits can be helpful in attracting private capital to fund low-emissions hydrogen,SAF and DACS,especially in jurisdictions where no compliance carbon pricing instruments are in place.Carbon pricing instruments,which includ

33、e“compliance”instruments(i.e.carbon taxes,emissions trading systems or hybrids of the two)and carbon credits,could help in different ways.In jurisdictions where compliance carbon pricing instruments are well The Role of Carbon Credits in Scaling Up Executive summary Innovative Clean Energy Technolog

34、ies PAGE|8 IEA.CC BY 4.0.established,governments could use the revenues to fund low-emissions technologies,especially for early-stage technologies facing the“valley of death”,which is the high-risk phase where many emerging technologies falter before reaching widespread adoption.High-quality carbon

35、credits used towards a compliance obligation or in the voluntary carbon market could also accelerate the deployment of these technologies.Carbon credit markets have faced serious concerns on both the supply and demand sides,but several initiatives have been set up to tackle these issues.On the suppl

36、y side,concerns often revolve around over-crediting,a lack of additionality or human rights abuses.On the demand side,some corporations have used carbon credits to make misleading claims about reaching carbon neutrality without making genuine efforts to reduce their own emissions.In response,initiat

37、ives such as the Integrity Council for the Voluntary Carbon Market(ICVCM)and the Voluntary Carbon Markets Integrity Initiative(VCMI)have set stricter quality standards on the supply side and created guidance to help buyers navigate these complex markets and perform due diligence.Generating high-qual

38、ity carbon credits from low-emissions hydrogen,SAF and DACS is possible with appropriate safeguards.Project developers and carbon credit programmes should prioritise addressing potential risks of an inaccurate quantification of emissions reductions from low-emissions hydrogen and SAF,and potential r

39、isks of double counting of the emissions reductions from SAF carbon credits.DACS developers should be ready to justify why they need carbon credits to cover the green premium even when other incentives are in place.Barriers and recommendations on the role of carbon credits in scaling up low-emission

40、s hydrogen,SAF and DACS Carbon credits cannot bridge the investment gap on their own,and governments and the private sector need to develop strategies to create the right enabling environment for investments.Low-emissions hydrogen,SAF and DACS require more than just carbon credits for large-scale ad

41、option.Carbon markets struggle to incentivise early-stage technologies due to high upfront costs,volatile credit prices and market uncertainties.Governments should adopt a mix of complementary policies to bridge the investment gap.Roadmaps providing investment clarity,research and development(R&D)pr

42、ogrammes,grants,and targeted public procurement(including using carbon credits)are some of the options available.Additionally,private sector coalitions could help lower technology costs through advance purchase commitments.The Role of Carbon Credits in Scaling Up Executive summary Innovative Clean E

43、nergy Technologies PAGE|9 IEA.CC BY 4.0.The current low availability of crediting methodologies hinders the generation of carbon credits from low-emissions hydrogen,SAF and DACS,but the landscape is shifting.There are currently no crediting methodologies to generate SAF carbon credits,and only a few

44、 methodologies for low-emissions hydrogen,which are limited in scope.Some DACS methodologies have been developed recently,but their applications have yet to scale.Carbon crediting programmes,project developers and experts are accelerating efforts to develop new methodologies to credit from these tec

45、hnologies,and they should also pay attention to potential quality issues.A coalition of stakeholders should develop clear guidance on emissions accounting,and efforts to get better data on emissions are necessary to provide the foundation for such guidance.This is particularly important for emission

46、s from the supply chain of low-emissions hydrogen and SAF carbon credits,which are complex as the emissions accounting often spans across several countries,across compliance regimes and voluntary markets,and across different types of carbon pricing instruments.Greater co-ordination and transparency

47、are needed to ensure that countries and non-state actors account accurately for emissions from the supply chain of low-emissions hydrogen and SAF carbon credits.The Role of Carbon Credits in Scaling Up 1.Introduction Innovative Clean Energy Technologies PAGE|10 IEA.CC BY 4.0.1.Introduction To shift

48、onto a 1.5 C trajectory,the world must accelerate global clean energy investments,especially on key technologies Reaching global net zero emissions will require a profound transformation of energy systems,necessitating an acceleration of the deployment of existing clean energy technologies,and the u

49、rgent deployment of innovative technologies that can address the most challenging sectors and remove residual emissions.Rapid progress has been made in the last few years on both fronts.For instance,innovation is already delivering new tools and lowering their costs:in the IEAs 2021 Net Zero Emissio

50、ns by 2050 Scenario(NZE Scenario),technologies not available on the market at the time were set to deliver nearly half of the emissions reductions needed in 2050 to reach net zero;in just two years,that number has fallen to around 35%.However,for the energy sector to achieve net zero CO2 emissions b

51、y 2050,further near-term progress is nonetheless essential to scale up new and emerging technologies.Among these,low-emissions hydrogen and hydrogen-based fuels,1 sustainable aviation fuels(SAF),2 and direct air capture and storage(DACS)would need to grow substantially in the next few years.Low-emis

52、sions hydrogen produced from renewables,nuclear energy or fossil fuels with carbon capture and storage can help integrate variable renewable electricity into the grid and decarbonise hard-to-abate sectors,such as long-haul transport,chemical manufacturing,and iron and steel production.In the NZE Sce

53、nario,low-emissions hydrogen production increases from less than 1 million tonnes(Mt)of hydrogen(H2)in 2022 to around 70 Mt H2 in 2030.SAF is critical to decarbonise the aviation sector,alongside a combination of other decarbonisation measures,and its share in final energy consumption in the aviatio

54、n sector rises from close to zero today to around 11%in 2030.DACS is also a crucial technology for removing CO2 from the atmosphere and for addressing residual emissions from hard-to-abate sectors.In the NZE Scenario,the CO2 removed by DACS increases from virtually zero in 2022 to almost 70 Mt CO2 i

55、n 2030.By 2050,DACS removes around 700 Mt CO2 per year from 1 Hydrogen-based fuels come under class of synthetic fuels which are also known as electrofuels or e-fuels,and ammonia produced from natural gas with carbon capture and storage.2 In this report,SAF refers to both bio-based aviation fuels an

56、d hydrogen-based SAF.The Role of Carbon Credits in Scaling Up 1.Introduction Innovative Clean Energy Technologies PAGE|11 IEA.CC BY 4.0.the atmosphere in the NZE Scenario,becoming a key technology for the achievement of global net zero emissions.Without widespread adoption of these technologies,the

57、world will fall short of its climate goals.Achieving the necessary scale-up depends on early deployment and investment.Across all clean energy technologies and infrastructure,the IEA estimates that an annual investment of USD 4.5 trillion per year by the early 2030s is needed to accelerate deploymen

58、t,up from USD 1.8 trillion in 2023.While public finance plays an important role,most of this investment needs to come from the private sector.Investment and deployment of low-emissions hydrogen,SAF and DACS are starting to pick up,but from a very low base,and need substantive public and private supp

59、ort to accelerate to the levels needed in the NZE Scenario.A variety of public and private financing mechanisms can help to scale up support for nascent technologies.High-quality carbon credits could play a role as a complementary instrument to other policies to accelerate the adoption of these tech

60、nologies by crowding in private capital,but some important barriers impede progress.This report explores how carbon credits can accelerate the adoption of low-emissions hydrogen,SAF and DACS globally.Chapter 2 presents the state of play for low-emissions hydrogen,SAF and DACS.Chapter 3 provides an o

61、verview of investment needs and sources of finance for the three technologies and highlights financing mechanisms that could help scale investments,and includes specific considerations for emerging market and developing economies(EMDE).Chapter 4 delves into the potential role of carbon credits in su

62、pporting the adoption of nascent technologies,providing insights into the latest developments in carbon crediting from low-emissions hydrogen,SAF and DACS.Chapter 5 provides an overview of current barriers to the adoption of carbon credits from these technologies and discusses how to overcome them.C

63、arbon credits can help to catalyse investment in innovative low-emissions technologies Accelerating the deployment of these technologies will require a combination of complementary policies,including mandates,tax credits,incentives and public procurement initiatives.Carbon pricing instruments,which

64、include“compliance”instruments(i.e.carbon taxes,emissions trading systems or hybrids of the two)and carbon credits,can also further contribute in different ways,depending on the specific local contexts.For instance,in jurisdictions where compliance instruments are well established,revenues can be re

65、directed towards scaling up the adoption The Role of Carbon Credits in Scaling Up 1.Introduction Innovative Clean Energy Technologies PAGE|12 IEA.CC BY 4.0.of low-emissions technologies.One notable example is the Innovation Fund in the European Union(EU)Emissions Trading System(ETS),which reinvests

66、part of the revenues raised by the ETS into funding programmes for innovative low-carbon technologies.By their design,carbon pricing instruments make carbon-intensive technologies more costly,thereby increasing the economic attractiveness of low-emissions technologies and incentivising actors to imp

67、lement mitigation activities.Compliance instruments,or,in other jurisdictions,high-quality carbon credits which refer to reductions or removals of CO2 or GHG emissions from the atmosphere generated by projects verified by third parties could help increase mitigation ambition while bridging the inves

68、tment and operational gap and channelling funding to low-emissions technologies.Compliance carbon pricing instruments and carbon credits can also act in a complementary manner,for instance in their scope and coverage.For instance,voluntary carbon markets typically incentivise mitigation activities t

69、o reduce or remove emissions in sectors that are not covered by compliance carbon pricing instruments or other regulatory mechanisms.Moreover,while compliance carbon pricing instruments drive mitigation that is usually confined within a jurisdictions geographical borders,carbon credits also incentiv

70、ise cross-border mitigation.Certain compliance carbon pricing instruments also allow covered entities to use eligible carbon credits to cover parts of their compliance obligations.For example,Singapore allows companies covered by its carbon tax to use eligible carbon credits to cover up to 5%of thei

71、r compliance obligations.Similarly,Canada also allows companies to use credits from its Greenhouse Gas Offset Credit System as a compliance option in its federal output-based pricing system.What are carbon credits,and how do carbon credit markets function?One carbon credit should represent one tonne

72、 of CO2 equivalent reduced or removed,although that is not always the case due to imperfections of the crediting methodologies or their implementation,or to a lack of additionality.Carbon credits can be generated by projects that do one of two things:Reduce GHG emissions against the likeliest forwar

73、d-looking counterfactual scenario,which forecasts emissions in the absence of the mitigation project.For instance,when a new emissions reduction project(e.g.a flight uses SAF,replacing traditional jet kerosene)is implemented instead of the baseline project(e.g.the plane uses traditional jet kerosene

74、),the difference in emissions between the counterfactual baseline scenario and the project scenario provides the volume of associated carbon credits(one credit is issued The Role of Carbon Credits in Scaling Up 1.Introduction Innovative Clean Energy Technologies PAGE|13 IEA.CC BY 4.0.per tonne of GH

75、G reduced).These projects are often referred to as“emissions reduction projects”and prevent additional future GHG emissions from being emitted.Remove previously emitted CO2 from the atmosphere.Removal projects use nature-based solutions(e.g.afforestation or reforestation)or technologies(e.g.DACS)to

76、remove CO2.The volume of human-induced,additional,removed CO2 is used to calculate the volume of carbon credits that can be issued(one credit is issued per tonne of CO2 removed).These projects are often referred to as“removal projects”.In both cases,project developers often use revenues from the sal

77、e of carbon credits to partially fund the operation of their projects,and they should justify before carbon credits are issued that these revenues are essential for the project to come to fruition.To receive carbon credits,as a standard procedure project developers must register their reduction or r

78、emoval projects to a carbon crediting programme,such as Gold Standard or Verra,in the voluntary carbon market(VCM),to the upcoming Article 6.4 mechanism under the United Nations Framework Convention on Climate Change(UNFCCC)(when it becomes operational),or to offset protocols or programmes under cer

79、tain compliance carbon pricing systems.While a centralised governmental body defines the guidance and rules and oversees their application of the Article 6.4 mechanism and programmes under compliance carbon pricing systems,VCM programmes which in certain cases are for-profit institutions are free to

80、 define their own rules.These programmes provide project developers access to several types of crediting methodologies that allow project developers to estimate how many carbon credits they could issue from a specific project.These methodologies,and their parameters thereof,vary across different pro

81、grammes,with some being more stringent than others.For instance,choosing one programme over another can impact the number of carbon credits issued for the same project.As a standard procedure,independent third-party auditors must verify that the project developers have correctly applied the chosen p

82、rogramme methodology,which also includes an obligation to monitor and report the project emissions.Only once the verification process is complete can the programme allow the issuance of carbon credits,usually for a fee.The Role of Carbon Credits in Scaling Up 1.Introduction Innovative Clean Energy T

83、echnologies PAGE|14 IEA.CC BY 4.0.Simplified flow chart of how carbon credits are issued and bought IEA.CC BY 4.0.Notes:NGOs=non-governmental organisations.The flow chart does not reflect all steps involved in more complex scenarios,such as trading of internationally transferred mitigation outcomes(

84、ITMOs),where further steps such as authorisation,or the application of a corresponding adjustment,are needed.Once carbon credits are issued,project developers can in theory directly sell the credits to the credit buyers,which can be governments or corporations(or even individuals).However,in practic

85、e,this transaction does not always occur directly between the project developers and the credit buyers.Instead,credit brokers or carbon exchanges usually aggregate the demand by purchasing carbon credits in bulk from the project developers and resell them to buyers.While recognising the importance o

86、f compliance carbon pricing instruments,this report analyses the potential role of carbon credits in accelerating the scale-up of low-emissions technologies.All actors should always prioritise reducing their own emissions first.In the last few years,loopholes and imperfections in the design of carbo

87、n credit markets have led to justified scepticism on the real effectiveness of these markets to drive emissions mitigation.However,in over 20 years of existence,carbon credit markets have also established a quite unique,robust and reliable cross-border financing infrastructure,which has proven effic

88、ient in channelling pay-for-performance funding to developing countries in particular.Non-state actors(e.g.corporations)and governments also use carbon credits for other purposes.For instance,non-state actors use carbon credits mostly from the VCMs to offset their residual emissions to claim carbon

89、neutrality or the The Role of Carbon Credits in Scaling Up 1.Introduction Innovative Clean Energy Technologies PAGE|15 IEA.CC BY 4.0.achievement of net zero emissions as part of their voluntary climate targets.Airlines also use carbon credits to comply with part of their obligations under the Carbon

90、 Offsetting and Reduction Scheme for International Aviation(CORSIA).Until 2020,some governments also used carbon credits from the Kyoto Protocol flexibility mechanisms to comply with their emissions mitigation obligations under the protocol.Since 2020,some governments have started or are considering

91、 using a form of carbon credits the internationally transferred mitigation outcomes(or ITMOs)to voluntarily co-operate under Article 6 of the Paris Agreement to reach and go beyond their nationally determined contributions(NDCs).Article 6 of the Paris Agreement Article 6 of the Paris Agreement allow

92、s countries to voluntarily co-operate with one another to achieve and go beyond their NDC ambition.Article 6.2 and Article 6.4 are market-based approaches,while Article 6.8 sets out guidelines for non-market co-operation.Article 6.2 sets the rules of bilateral and multilateral voluntary co-operation

93、 through Article 6 credits(ITMOs)across countries.Several countries have already begun to trade ITMOs under Article 6.2.Article 6.4 builds on the rules of Article 6.2,and develops a centralised mechanism,intended to replace the Kyoto Protocols Clean Development Mechanism(CDM).The Article 6.4 mechani

94、sm will operate as a carbon crediting programme,issuing credits when projects,programmes and policies are developed based on approved methodologies,and it will record in a registry the credits issued and transacted.The Article 6.4 Supervisory Body will oversee the mechanism.As of 2024,Article 6.4 is

95、 not yet operational because countries could not reach an agreement at the 28th Conference of the Parties(COP28).A key accounting rule set out in Article 6 co-operation is the mandatory application of corresponding adjustments on ITMO transactions,whereby the seller country is not able to use the em

96、issions reduction or removal associated with the ITMO towards its NDC.This is critical to prevent double counting or double claiming,i.e.a situation where both the seller and buyer countries count or claim the same emissions reductions towards their respective NDCs.Countries can use ITMOs towards th

97、eir NDCs,and alongside other actors for other international mitigation purposes,such as for complying with sectoral compliance schemes.For instance,CORSIAs first phase(2024-2026)requires airlines to purchase credits with corresponding adjustments,necessitating ITMOs.The Role of Carbon Credits in Sca

98、ling Up 1.Introduction Innovative Clean Energy Technologies PAGE|16 IEA.CC BY 4.0.Initiatives to strengthen environmental integrity and restore trust and transparency in carbon markets Carbon credit markets have come under scrutiny in recent years.On the supply side,there have been doubts over the“q

99、uality”of certain types of carbon credits which is a multifaceted concept.Some projects have been accused of over-crediting,i.e.issuing more credits than emissions reduced or removed,because of lenient quantification of the mitigated emissions.Other projects have been accused of a lack of additional

100、ity,in cases,for instance,where projects would have succeeded even in the absence of the price signal from carbon credits.Other projects have been accused of human rights abuses.On the buyer side,some companies have suffered from greenwashing accusations because of misleading claims on the use of ca

101、rbon credits,particularly those who retired carbon credits to claim carbon or climate neutrality without making genuine efforts to reduce their own emissions;or those who bought carbon credits from low-quality projects without performing due diligence.In the last few years,there have been efforts to

102、 improve the environmental integrity of carbon markets addressing both the supply and demand sides.For instance,on the supply side,the Integrity Council for the Voluntary Carbon Market(ICVCM)was set up as an independent governance body to set minimum thresholds for high-quality carbon credits,the cr

103、iteria of which are detailed in the ICVCMs Core Carbon Principles(CCPs).Similarly,the International Civil Aviation Organizations(ICAOs)CORSIA sets out criteria for eligible carbon credits that can be used by airlines towards the international aviation decarbonisation goal.Progressive strengthening o

104、f baseline methodologies under the CDM also contributed to continuous improvement.Many actors also hope that if the Article 6.4 mechanism manages to develop strict quality criteria,especially in terms of methodologies and additionality,these could serve as benchmarks for the carbon crediting program

105、mes under the VCM.On the demand side,it is usually difficult for corporations or governments without specific expertise to navigate the multifaceted carbon credit markets.A number of initiatives have been set up to provide guidance for buyers.For instance,the Claims Code of Practice of the Voluntary

106、 Carbon Markets Integrity initiative(VCMI)provides guidance on how carbon credits can be used with integrity,safeguarding against greenwashing practices.Similarly,the Nordic Code of Best Practice for the Voluntary Use of Carbon Credits aims to promote a coherent and transparent use and claim of high

107、-integrity voluntary carbon credits.The Finnish government also issued a guide in 2023 to support voluntary mitigation actions with carbon credits,which include a comprehensive overview of existing demand-side integrity initiatives.The Role of Carbon Credits in Scaling Up 1.Introduction Innovative C

108、lean Energy Technologies PAGE|17 IEA.CC BY 4.0.The past years have also seen the emergence of carbon credit rating companies such as Sylvera,Calyx and BeZero.These companies rate carbon credit projects against independent,self-defined quality criteria,and some stakeholders see them as an additional

109、layer of due diligence in the market,though there is still some degree of variance in their ratings of similar projects.Non-exhaustive examples of initiatives and organisations seeking to improve environmental integrity and transparency in carbon credit markets Role Organisation Description Supply s

110、ide Integrity Council for the Voluntary Carbon Market The ICVCM is an independent governance body that seeks to set minimum thresholds for high-quality carbon credits.The ICVCMs CCPs set out detailed criteria for carbon crediting programmes and methodologies.Carbon Credit Quality Initiative(CCQI)The

111、 CCQI provides assessments on the different types of carbon credits based on characteristics such as project type,carbon crediting programme,sustainable development safeguards and host country.CORSIA Eligible Emissions Units The ICAOs CORSIA allows airlines to use carbon credits towards achieving th

112、e target of carbon-neutral growth.Similar to the ICVCMs CCPs,CORSIA sets out eligibility criteria.International Carbon Reduction and Offset Alliance(ICROA)ICROAs Code of Best Practice sets out best practices for carbon credits and is used to assess carbon crediting that seeks its endorsement.Carbon

113、crediting programmes(e.g.American Carbon Registry,Article 6.4,ART-TREES,Cercarbono,Climate Action Reserve,Global Carbon Council,Gold Standard,Puro.earth,Verified Carbon Standard)Carbon crediting programmes are responsible for developing methodologies that specify how to develop projects and how to e

114、stimate emissions reductions or removals to generate carbon credits.Programmes also specify how independent validation/verification bodies should audit projects and manage registries.Rating agencies(e.g.BeZero,Calyx Global,MSCI Carbon Markets,Renoster,Sylvera)The recent years have also seen the emer

115、gence of carbon credit rating companies.These companies rate projects for quality and provide an additional layer of checks.Demand side Voluntary Carbon Markets Integrity Initiative VCMIs Claims Code of Practice,designed for building integrity in voluntary carbon markets,sets out guidance for compan

116、ies and other non-state actors on how they could credibly make voluntary use of carbon credits as part of their climate commitments and what they could communicate regarding the use of those credits.The Claims Code of Practice requires that companies use carbon credits in addition to prioritising in

117、ternal emissions reductions,and to make credible claims The Role of Carbon Credits in Scaling Up 1.Introduction Innovative Clean Energy Technologies PAGE|18 IEA.CC BY 4.0.Role Organisation Description Demand side(continued)Science-Based Targets Initiative(SBTi)The SBTi sets out guidance and principl

118、es to set and achieve climate targets.Its guidance covers the use of carbon credits in relation to a corporations targets.Government regulations on green claims or reporting(e.g.European Union EU Green Claims Directive,United States US Commodity Futures Trading Commission Proposed Guidance on volunt

119、ary carbon credit derivatives)Governments are also increasingly weighing in on carbon credit use,in particular where it pertains to the use of carbon credits in relation to corporate claims and public communications.Supply and demand side UNFCCC(i.e.Article 6 of the Paris Agreement)Article 6 of the

120、Paris Agreement sets out the rules that enable countries to generate,trade and use carbon credits towards their climate targets.International Organization for Standardization(ISO)The ISO develops standards pertaining to a number of sectors,including on climate change.Some of these standards such as

121、the“net zero guidelines”and the“carbon neutrality standard”set out guidelines on carbon credit quality and use.The Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydrogen,sustainable Innovative Clean Energy Technologies aviation fuels and direct air capture and storage PAGE|1

122、9 IEA.CC BY 4.0.2.State of play for low-emissions hydrogen,sustainable aviation fuels and direct air capture and storage State of play for low-emissions hydrogen Hydrogen is a versatile energy carrier that has the potential to address various clean energy challenges.Today hydrogen is primarily emplo

123、yed in the refining and chemical industries,and its production is largely reliant on coal and natural gas,contributing to substantial CO2 emissions.However,producing hydrogen through renewable or nuclear energy,or fossil fuels with carbon capture,holds the potential to decarbonise a diverse range of

124、 sectors.These include some hard-to-abate sectors,such as long-haul transport,chemical manufacturing,and iron and steel production.Moreover,electricity generated by hydrogen can help in integrating variable renewable energy sources into the electricity grid,with hydrogen being an option for storing

125、energy over extended periods.Boosted by climate goals and,in some countries,by energy security considerations,policy momentum behind low-emissions hydrogen remains strong.The adoption of new industrial strategies by several major economies sees low-emissions hydrogen playing a key part.However,this

126、momentum has yet to turn into large-scale deployment.Global hydrogen production reached almost 95 million tonnes(Mt)of hydrogen(H2)in 2022,with a slow but steady increase since 2020.Hydrogen production was dominated by unabated fossil fuels:62%of global production came from unabated natural gas,21%f

127、rom unabated coal,16%produced as a by-product from different operations such as naphtha crackers,and with low-emissions hydrogen making up only 0.7%of global production,almost entirely from fossil fuels with carbon capture utilisation and storage(CCUS).Production from water electrolysis continued to

128、 be relatively small,still below 100 kilotonnes of H2 in 2022,which represents 35%growth compared with the previous year.The Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydrogen,sustainable Innovative Clean Energy Technologies aviation fuels and direct air capture and stor

129、age PAGE|20 IEA.CC BY 4.0.Global hydrogen production by technology,2020-2022 IEA.CC BY 4.0.Source:IEA(2023),Global Hydrogen Review 2023.Levelised cost of hydrogen production by technology in 2021,2022 and in the Net Zero Emissions by 2050 Scenario in 2030 IEA.CC BY 4.0.Notes:kg=kilogramme;PV=photovo

130、ltaic;NZE=Net Zero Emissions by 2050 Scenario in 2030.Solar PV,wind and nuclear refer to the electricity supply to power the electrolysis process.NZE Scenario values refer to 2030.The dashed area represents the CO2 price impact,based on USD 15 per tonne(t)of CO2 to USD 140/t CO2 for the NZE Scenario

131、.The Global Hydrogen Review 2023 provides the techno-economic assumptions on energy and capital costs.Source:IEA(2023),Global Hydrogen Review 2023.If all planned projects from electrolysers and fossil fuels with carbon capture are realised,these will lead to annual production of low-emissions hydrog

132、en of 38 Mt H2 in 2030.Of these,around 27 Mt H2 is based on electrolysis and low-emissions electricity,and around 10 Mt will come from projects using fossil fuel with CCUS.Electrolysis projects have a wider geographical diversity,with Europe,Australia,New Zealand and Latin America leading announceme

133、nts of planned projects;conversely,announcements for low-emissions hydrogen production projects from fossil fuels with carbon capture are mostly concentrated in North Natural gas w/o CCUS 62%Oil 0.5%Coal 21%By-product 16%Fossil fuels w/CCUS 0.6%Electricity 0.1%0 10 20 30 40 50 60 70 80 90 1002020202

134、12022Mt HElectricityFossil fuels w/CCUSBy-productCoalOilNatural gas w/o CCUS0246810121420212022NZE20212022NZE20212022NZE20212022NZE2022NZE2022NZE2022NZE2022NZENatural gas w/oCCUSNatural gas w/CCUSCoal w/o CCUSCoal w/CCUSWindonshoreWindoffshoreSolar PVNuclearUSD/kg HThe Role of Carbon Credits in Scal

135、ing Up 2.State of play for low-emissions hydrogen,sustainable Innovative Clean Energy Technologies aviation fuels and direct air capture and storage PAGE|21 IEA.CC BY 4.0.America(50%)and Europe(40%).However,only 4%of potential low-emissions hydrogen production in 2030 has taken final investment deci

136、sion,and the slow implementation of policy or regulatory support is delaying investment decisions.Hydrogen-based fuels,such as ammonia,methanol and synthetic hydrocarbons,are more convenient to store and transport compared with pure hydrogen.They can also utilise existing infrastructure,offering pot

137、ential advantages such as the production of synthetic kerosene that can fit existing end-use technology in aviation.In 2022,there were around 80 hydrogen-based fuels production projects in operation,corresponding to approx.0.3 Mt H2 of annual production.Ammonia,which is used as fertiliser or long-di

138、stance carrier for hydrogen,and synthetic methane were the largest and second-largest hydrogen-based fuels produced respectively.Global hydrogen-based fuel production by fuel,2019-2023 IEA.CC BY 4.0.Notes:FT=Fischer-Tropsch;%of projects based on total number of low-emissions hydrogen projects.2023 v

139、alues are estimated from October 2023 data release.Source:IEA(2023),Global Hydrogen Review 2023.Currently announced projects in 2023 project hydrogen-based fuels production to grow to an annual production of 17 Mt H2 equivalent(H2-eq)by 2030,for a total of 325 projects.This capacity in 2030 is mostl

140、y concentrated in Australia and North America(4.7 Mt H2-eq from 75 projects combined),followed by Central and South America(2.6 Mt H2-eq)and Europe(1.8 Mt H2-eq).However,converting hydrogen into these fuels requires additional energy and feedstocks,which could result in higher costs.0%10%20%30%40%50

141、%0.00.10.20.30.40.520192020202120222023Mt H2equivalentFT fuelsSynthetic methaneSynthetic methanolAmmonia%of all projects(right axis)The Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydrogen,sustainable Innovative Clean Energy Technologies aviation fuels and direct air captu

142、re and storage PAGE|22 IEA.CC BY 4.0.Levelised costs of ammonia in 2022 and 2030 in the Net Zero Emissions by 2050 Scenario IEA.CC BY 4.0.Note:NH3=ammonia.Source:IEA(2023),Global Hydrogen Review 2023.As of February 2024,46 countries and the European Union(EU)have implemented hydrogen strategies.Targ

143、ets for the adoption of hydrogen production technologies are expanding,especially for electrolysis,with national targets reaching a combined 160 gigawatts(GW)to 210 GW.However,there has been minimal progress in setting targets to increase demand for low-emissions hydrogen,with the notable exception

144、of the European Union,which established targets in March 2023 to stimulate demand in industry and transport.The majority of existing policies focus on supporting demand creation in transportation applications,primarily through purchase subsidies and grants,while only a few policies target industrial

145、 applications,despite these applications accounting for the majority of current demand.Governments are also considering adopting quotas and mandates to support demand creation for low-emissions hydrogen in industry,aviation and shipping,although none of the announced quotas have yet been implemented

146、.A few countries and regions,including the European Union(EU),the United States(US)and the United Kingdom(UK),have also stepped up efforts to support research and development(R&D)and innovation in low-emissions hydrogen.Several governments have also begun to implement policies to support project dev

147、elopers and mitigate investment risk in low-emissions hydrogen,in the form of grants,loans,tax breaks and carbon contracts for difference.Several countries and regions,including Canada,the European Union,India,Japan and the United States and have incorporated e-fuels,fuels made from low-emissions hy

148、drogen,into their hydrogen strategies and roadmaps to bolster R&D.Brazil is also formulating a regulatory framework for low-emissions e-fuels.Globally,however,low-emissions hydrogen-based fuels are not expanding at a rate consistent with NZE Scenario ambitions.0 5001 0001 5002 0002 5003 0003 5002022

149、2023 STEPS2030 NZEUSD/t NH3Renewable ammoniaThe Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydrogen,sustainable Innovative Clean Energy Technologies aviation fuels and direct air capture and storage PAGE|23 IEA.CC BY 4.0.Selected examples of policy support mechanisms to s

150、upport low-emissions hydrogen production Government/Jurisdiction Description Brazil Brazil adopted the National Hydrogen Programme(PNH2)in 2022,establishing a series of guidelines in developing hydrogen production.The Triennial Work Plan(2023-2025)aims to increase investments in research,development

151、 and innovation in low-emissions hydrogen to BRL 200 million(Brazilian reals)3 per year in 2025.Canada Canada published its Hydrogen Strategy in 2020 with the goal to deliver up to 30%of its end-use energy in the form of hydrogen by 2050.Chile Chile published a National Green Hydrogen Strategy in 20

152、20 with three main objectives:have 5 GW of electrolysis capacity operating and under development by 2025 produce the cheapest green hydrogen in the world by 2030 be among the worlds three largest exporters by 2040.In 2021,Chile presented a comprehensive document outlining its investment opportunitie

153、s and selected private projects under development.It has also have defined a Roadmap for 2023-2030 which is currently in public consultation.EuropeanUnion The European Commission approved two rounds of funding for major hydrogen-related initiatives in 2023:Hy2Tech,focused on developing innovative hy

154、drogen technologies Hy2Use,focused on industrial applications.Additionally,the European Hydrogen Bank launched a pilot auction to support domestic production of renewable hydrogen which closed in February 2024.The European Hydrogen Bank plans a new tender for imports in 2024.Germany The H2Global ini

155、tiatives bidding process commenced in December 2022,with hydrogen deliveries anticipated for the end of 2024.Moreover,Germany has recently become the first European Union(EU)member state participating in the European Hydrogen Bank.India India approved the National Green Hydrogen Mission in 2023 with

156、 the aim to develop hydrogen production capacity of at least 5 Mt per year by 2030.Japan Japans New Energy and Industrial Technology Development Organization(NEDO)has allocated JPY 220 billion(Japanese Yen approx.USD 1.45 billion)from its Green Innovation Fund Project to support the development of a

157、 liquefied hydrogen supply chain between Australia and Japan.Moreover,the bill passed in February 2024 on the Promotion of the Supply and Utilization of Low-Emissions Hydrogen intends to cover the difference between the cost of low-emissions hydrogen(including its derivative products)and the referen

158、ce price of the fossil fuel counterpart.3 Exchange rate(2022):1 Brazilian Real(BRL)=USD 0.19.The Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydrogen,sustainable Innovative Clean Energy Technologies aviation fuels and direct air capture and storage PAGE|24 IEA.CC BY 4.0.Go

159、vernment/Jurisdiction Description Singapore Singapore introduced its National Hydrogen Strategy in 2022,with efforts to experiment with the use of advanced hydrogen technologies,invest in R&D,pursue international collaborations,undertake long-term land and infrastructure planning,and support workfor

160、ce training and development of the broader hydrogen economy.United Kingdom The government launched the first Electrolytic Allocation Round between July 2022 and January 2023,identifying promising projects with the goal of supporting at least 250 megawatts(MW)of capacity.A second allocation round wit

161、h an aim to support up to 875 MW of capacity by the end of 2025 commenced in December 2023.United States The government introduced a tax credit,an investment credit and grant funding to support the development of low-emissions hydrogen production projects.In September 2022,the Department of Energy(D

162、OE)announced a USD 7 billion call for the establishment of regional clean hydrogen hubs.Seven hubs were selected in October 2023.A number of barriers are holding back low-emissions hydrogen development.These include uncertainties about demand,high costs of production,lack of clarity in regulations a

163、nd a lack of infrastructure to deliver hydrogen to end users.Without robust demand,producers of low-emissions hydrogen will not secure sufficient off-takers to underpin large-scale investments,jeopardising the viability of the entire low-emissions hydrogen industry.Rising inflation exacerbated these

164、 barriers.As a consequence,public funds have become scarcer as financing needs for individual projects become larger.Moreover,long lead times for low-emissions hydrogen infrastructure projects mean that early and coherent planning is needed to get on track.This is particularly acute for storage,whic

165、h may have an important role to play to ensure security of supply.State of play for sustainable aviation fuels Jet fuel from fossil fuels still dominates the aviation sector,which is responsible for over 2%of global energy-related CO2 emissions.To decarbonise this sector,various parallel approaches

166、are essential.Efficiency improvements will play a crucial role in aviation decarbonisation,but they can offer only a partial answer to the problem.Modern airplanes,employing enhanced aerodynamics and lightweight materials,offer nearly 20%greater fuel efficiency compared with their decade-old counter

167、parts.While further advancements are anticipated,these will take time,mostly due to the long implementation cycles of technological,material and design modifications in aviation.The reduction in emissions coming from efficiency improvements cannot fully counterbalance the rising demand for air trave

168、l,which is projected to increase by approximately 4%annually until 2050.This points to the need to develop a further array of possible complementary solutions to tackle the remaining emissions in the aviation sector.One of them is The Role of Carbon Credits in Scaling Up 2.State of play for low-emis

169、sions hydrogen,sustainable Innovative Clean Energy Technologies aviation fuels and direct air capture and storage PAGE|25 IEA.CC BY 4.0.the development and deployment of low-emissions fuels.Sustainable aviation fuels(SAF)provide an alternative to traditional jet fuel(i.e.kerosene),offering the poten

170、tial to reduce emissions.SAF are drop-in fuels that are blended with conventional oil products at rates of up to 50%,but they have the potential to be used on their own some aircraft manufacturers and airlines are piloting SAF-only run flights.SAF,which can take the form of biojet kerosene and synth

171、etic fuels(e.g.made from low-emissions hydrogen and CO2),play an increasingly important role in the energy demand in aviation in the IEA NZE Scenario,in both 2030 and 2050.Energy demand in aviation by fuel and scenario,2022-2050 IEA.CC BY 4.0.Notes:EJ=exajoules;STEPS=Stated Policies Scenario;APS=Ann

172、ounced Pledges Scenario.SAF are categorised in this chart as“Synthetic kerosene”and“Biojet kerosene”.Source:IEA(2023),World Energy Outlook 2023.SAF are still very expensive and today meet less than 0.1%of energy demand in aviation.Despite a substantial increase in SAF offtake agreements in the last

173、three years,indicating rising demand,high costs and limited SAF availability continue to hinder widespread adoption.The announced pipeline of SAF projects accounts for only approximately 1-3.5%of global aviation demand by 2028.Moreover,while existing policies under the IEA Stated Policies Scenario(S

174、TEPS)will bring biojet fuels share to 1%by 2028,the NZE Scenario requires 8%of fuel supply coming from biojet fuel by 2030.This highlights the need for further expansion of SAF production.Barriers to widespread adoption of SAF are its high production costs and the limited supply of resources to prod

175、uce biojet fuel.The price of biojet kerosene is currently around 3-4 times the price of conventional kerosene,while the cost of producing synthetic kerosene is 5-6.5 times the price of conventional kerosene.Increasing production capacity can help bring down costs due to economies of scale,but the ST

176、EPS projects the average price of SAF to be roughly twice that 0510152025STEPSAPSNZESTEPSAPSNZE202220302050EJElectricityHydrogenSynthetic keroseneBio jet keroseneOilThe Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydrogen,sustainable Innovative Clean Energy Technologies av

177、iation fuels and direct air capture and storage PAGE|26 IEA.CC BY 4.0.of conventional kerosene in 2030.Synthetic kerosene is produced in only negligible quantities today,and is expected to contribute only over the longer term due to its low technology readiness and high cost.In 2021,Atmosfair,a Germ

178、an non-profit organisation,inaugurated the first project for the production of synthetic fuels using hydrogen produced from renewable electricity,which included an offtake agreement for 25 000 litres of synthetic kerosene annually with the airline Lufthansa.Production costs for synthetic kerosene fr

179、om electrolytic hydrogen vary greatly depending on the cost of electricity and the source of the CO2 used for the production,e.g.they can range from USD 30/t CO2 for biogenic CO2 from ethanol production to USD 600/t CO2 to USD 1 000/t CO2 for CO2 from direct air capture(DAC).Private sector investmen

180、t is also essential for the advancement and commercialisation of synthetic kerosene,which has low technology readiness and high costs today.Levelised costs of renewable synthetic kerosene and biojet fuel in 2023 and 2030 in the Net Zero by 2050 Scenario IEA.CC BY 4.0.Note:bbl=barrel.Source:IEA(2023)

181、,Global Hydrogen Review 2023.Various policies are already in place to promote SAF development.The US Inflation Reduction Act offers tax credits for SAF production,with aims to achieve a production capacity of 3 billion gallons(0.2 million barrels per day)by 2030 and 35 billion gallons(2.3 million ba

182、rrels per day)by 2050,sufficient to fuel all US flights by 2050.Moreover,the United States has also developed the SAF Grand Challenge Roadmap to outline measures to meet its 2030 and 2050 targets.The Inflation Reduction Act provides USD 3.3 billion in tax credits and a competitive grant programme fo

183、r SAF support over the period 2023-2031.The EU Innovation Fund also provides grants for SAF development,and ReFuelEU Aviations mandate provides for SAF to make up 70%of aviation fuel in the European Union by 2050.Japan also has a planned mandate for SAF to account for 10%of aviation fuel usage by 20

184、30.In the Peoples Republic of China(hereafter“China”),the Civil 0 250 500 7501 0001 2501 5002030 NZE20232030NZE20232030NZE2023Biojet fuelBiogenic COfeedstockDAC COfeedstockUSD/bblRenewable synthetic keroseneThe Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydrogen,sustainab

185、le Innovative Clean Energy Technologies aviation fuels and direct air capture and storage PAGE|27 IEA.CC BY 4.0.Aviation Administration of China targets an increase in SAF use and a lower GHG emissions intensity by 2025.The UK Jet Zero strategy to decarbonise aviation by 2050 also supports further S

186、AF development.Singapore is introducing a 1%SAF target for flights departing Singapore from 2026,with the aim to raise it to 3%-5%by 2030,subject to global developments and the wider availability and adoption of SAF.Finally,India intends to mandate the use of SAF to make up 1%of aviation fuel from 2

187、027 and increasing to 2%in 2028.The limited supply of resources to produce biojet fuel is another potential barrier to SAF uptake.Certain feedstocks,such as used cooking oil and waste animal fats currently used for biojet kerosene production,have finite supply that can hinder growth in the medium to

188、 long term.SAF manufacturing up to 2027 will mostly depend on waste and residue oils,fats,and vegetable oils.The demand for these products for the production of all biofuels is anticipated to rise by 50%between 2023 and 2028,which is likely to keep raw material costs high.To overcome this potential

189、feedstock scarcity and meet future biofuel demand,alternative production routes using materials such as municipal solid waste,agricultural residues and forestry residues are being further developed and brought to market.State of play for direct air capture and storage DACS can play an important role

190、 in net zero emissions pathways.DACS is a key CO2 removal approach for balancing residual emissions mainly in hard-to-abate sectors;however,it should not substitute for immediate and substantial GHG emissions reductions.The captured CO2 from direct air capture can also be converted into feedstock fo

191、r low-emissions fuels,such as synthetic kerosene(see the related section above)or other synthetic fuels.Using air-captured CO2 offers the possibility for these fuels to be close to carbon-neutral over their life cycle.In this respect,DACS can also be one of very few solutions available to reduce emi

192、ssions in aviation,which remains one of the most challenging energy sectors to decarbonise.DACS is a relatively new technology:the first pilot plant was commissioned in 2010,and the first kilotonne-scale plant was commissioned in 2021.Two main technological approaches are currently employed to captu

193、re CO2 from the atmosphere:solid direct air capture(S-DAC)and liquid direct air capture(L-DAC).S-DAC technologies,which are currently at a demonstration stage,operate at ambient to low pressure and medium temperature(80 C to 120 C).L-DAC technologies operate at high temperatures(300 C to 900 C)but a

194、re currently at a prototype stage.Both are characterised by high energy requirements,and need to be scaled up dramatically to align with the IEA NZE Scenario.New promising The Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydrogen,sustainable Innovative Clean Energy Technolo

195、gies aviation fuels and direct air capture and storage PAGE|28 IEA.CC BY 4.0.technologies are also emerging,such as electro-swing adsorption,zeolites and passive DAC.While they can offer several advantages,including lower costs,lower energy intensities and higher availability of sorbents,they are al

196、l still at early stages of development.In DACS applications with geological sequestration,the timescale of the storage for the captured CO2 is usually very long,with a high probability that most of the CO2 will remain trapped for at least 1 000 to 10 000 years.In certain cases,DACS developers need t

197、o compress the captured CO2 at a very high pressure to inject it into geological formations.This step increases capital costs,due to the requirement for additional equipment such as a compressor,and also operating costs,due to higher energy demand.To date,27 DAC plants have been commissioned worldwi

198、de and the installed capture capacity of DACS today is less than 0.01 Mt CO2/year,installed in the United States and Iceland.Some DACS projects are also planned in Kenya.To align with the IEA NZE Scenario,this capacity needs to increase to 69 Mt CO2/year in 2030,to 162 Mt CO2/year in 2035 and to 621

199、 Mt CO2/year in 2050.Global direct air capture and storage capacity in the Net Zero by 2050 Scenario IEA.CC BY 4.0.Note:Direct air capture capacity refers to the CO2 captured via DAC and permanently stored in geological storage.Source:IEA(2023),World Energy Outlook 2023.DACS is currently associated

200、with high costs and energy needs.Broadly,these vary depending on the capital cost of the plant(e.g.air contactors,compressors,vacuum pumps),type of technology(S-DAC,L-DAC or other novel methods),source of energy,and proximity to relevant storage or utilisation sites.At the project level,additional f

201、actors that influence the cost of CO2 capture include the scale of the DACS plant and its level of utilisation,as well as capture efficiencies,The cost of removal through DACS technologies ranges today between USD 300/t CO2 for L-DAC and USD 730/t CO2 for S-DAC.This includes an 0 150 300 450 600 750

202、2022203020402050Mt COThe Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydrogen,sustainable Innovative Clean Energy Technologies aviation fuels and direct air capture and storage PAGE|29 IEA.CC BY 4.0.average transport and storage cost of USD 30/t CO2,but transport and stora

203、ge costs can vary significantly depending on transport distance and type of storage.Project developers can optimise the siting of DACS facilities to minimise these costs by targeting locations characterised by high penetration of renewable energy and CO2 storage potential.Moreover,there is further c

204、onsiderable potential for cost reduction in the future,with e.g.the US DOE intending to bring the cost of DACS below USD 100/t CO2 within a decade through its Carbon Negative Shot.Moreover,in the short to medium term,the expected cost reduction for L-DAC from the first large prototype to the nth of

205、a kind is 27%,while for S-DAC technology providers are expecting a threefold to sixfold cost reduction.Cost reductions will be driven by performance improvement,and also by further research,economies of scale and technology spillover.Direct air capture capacity by country/region for use and storage

206、according to announced projects and in the Net Zero by 2050 Scenario IEA.CC BY 4.0.Notes:RoW=rest of world.Announcements included as of July 2023.Dedicated storage only.Announced capacity includes existing capacity.“Unspecified”refers to 69 to 100 facilities recently announced by 1PointFive and Occi

207、dental(Carbon Engineering),for which locations have not yet been finalised.The fate of the captured CO2(storage or use)for these unspecified projects has not been disclosed.Source:IEA(2024),IEA CCUS Projects Database,accessed 8 April 2024.A few countries have taken an early lead in supporting DACS r

208、esearch,development,demonstration and deployment.However,policy support mechanisms are concentrated in the advanced economies,and there is no DACS-specific support policy in emerging market and developing economies.Several corporations,including JPMorgan Chase&Co.,BlackRock and Microsoft,have also a

209、nnounced major investments in the DACS sector in various forms.0 1 2 3 4 52021Announced2030 NZECO utilisationMt CO2/yrEuropeNorth AmericaUnspecifiedNZE demand0 10 20 30 40 50 60 702021Announced2030 NZECO storageMt CO2/yrThe Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydro

210、gen,sustainable Innovative Clean Energy Technologies aviation fuels and direct air capture and storage PAGE|30 IEA.CC BY 4.0.Selected examples of policy support mechanisms to support DACS research,development,demonstration and deployment Government/Jurisdiction Policy instrument Description Canada C

211、limate Action and Awareness Fund The fund is investing CAD 206 million(Canadian dollars)4(USD 164 million)to support projects that will reduce Canadas GHG emissions,including efforts to understand the potential for,and implications of,carbon removal technologies including DAC.Net Zero Accelerator Ca

212、nada announced this initiative as part of the Strategic Innovation Fund in December 2020 and further enhanced it with the Budget 2021 to provide a total of CAD 8 billion(approx.USD 6 billion)over seven years to support the decarbonisation of the industrial sector.DAC with CO2 use is eligible as a cl

213、imate-neutral CO2 feedstock to produce low-carbon products.Canadas Greenhouse Gas Offset Credit System Canadas GHG Offset Credit System Regulations include a protocol for direct air carbon dioxide capture and sequestration that is under development to further incentivise permanent storage opportunit

214、ies.Clean Fuel Standard The standard will require liquid fuel suppliers to gradually reduce the carbon intensity of the fuels they produce and sell.Low-carbon-intensity fuels include those made from sustainably sourced biomass and DAC.Moreover,the third reading of the Low Carbon Fuels Act of British

215、 Columbia indicates they are considering making eligible removals from the atmosphere at a site in British Columbia to generate compliance credits.Investment tax credit for carbon capture Canadas 2021 federal budget included the announcement of a planned investment tax credit for CCUS projects.In th

216、e 2022 federal budget,the government outlined details of the tax credit,which will apply to CCUS projects that permanently stored captured CO2 via dedicated geological storage or storage of CO2 in concrete.From 2022 through 2030,the tax credit rates will be set at 60%for investment in equipment to c

217、apture CO2 in DAC projects.4 Exchange rate(2022):1 Canadian dollar(CAD)=USD 0.77.The Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydrogen,sustainable Innovative Clean Energy Technologies aviation fuels and direct air capture and storage PAGE|31 IEA.CC BY 4.0.Government/Jur

218、isdiction Policy instrument Description Denmark NECCS Fund The DKK 2.5 billion(Danish kroner approx.USD 0.4 billion)5 NECCS Fund aims to achieve negative emissions of an additional 0.5 Mt per year from 2025 onwards through CO2 capture.The fund will support the achievement of negative emissions from

219、CO2 capture of biogenic sources and subsequent geological storage.Biogenic sources refers to CO2 capture from biogas upgrading,biomass-based power and heat production,the biogenic share of CO2 captured in waste incineration plants,and carbon captured directly from the atmosphere(DACS).European Union

220、 Horizon Europe DACS projects are eligible for support under Horizon Europe,the main European Union funding programme for research and innovation,with a total budget across all areas of EUR 95.5 billion(around USD 104 billion).Innovation Fund The European Union launched in 2020 this EUR 10 billion(a

221、pprox.USD 10.9 billion)fund to support innovation in low-emissions technologies and processes,including CCUS and DAC.Communication on Sustainable Carbon Cycles The communication,released in December 2021,sets out a strategy to increase removals of carbon from the atmosphere.It suggests that 5 Mt of

222、CO2 should be removed annually by 2030.As part of its next steps,the European Union has agreed on a regulation that establishes a voluntary framework to certify carbon removals,farming and storage.Industrial Carbon Management Communication The communication includes preparatory work in setting up a

223、regulatory framework for CO2 transport and storage,assessing the potential for industrial carbon removals,and creating a carbon accounting system for CO2 utilisation.The strategy links to the recent recommendations formulated under the 2040 Climate Target Plan.The 2040 recommendation indicates that

224、approximately 280 Mt would need to be captured by 2040,rising to around 450 Mt annually by 2050.Connecting Europe Facility(CEF)The CEF promotes the development of cross-border energy and transport infrastructure projects.So far,the CEF has granted around EUR 680 million to CO2 projects of common int

225、erest such as pipelines connecting capture initiatives,and export terminals to storage sites.Japan Moonshot Goal 4 The Moonshot Goal 4(a subset of the Moonshot R&D Program,launched in 2019 with a total budget 5 Exchange rate(2022):1 Danish kroner(DKK)=USD 0.14.The Role of Carbon Credits in Scaling U

226、p 2.State of play for low-emissions hydrogen,sustainableInnovative Clean Energy Technologies aviation fuels and direct air capture and storagePAGE|32 IEA.CC BY 4.0.Government/Jurisdiction Policy instrument Description Japan(continued)of JPY 100 billion approx.USD 0.7 billion)focuses on“the realisati

227、on of a sustainable resource circulation to recover the global environment by 2050”.In order to reach this goal,the Moonshot Goal 4 includes R&D funding of JPY 20 billion(approx.USD 130 million)for multiple innovative technologies,including DAC.Furthermore,the government has established a DAC workin

228、g group that aims to discuss the creation of a market for DAC and development of a calculation methodology.United Kingdom DAC and GHG Removal Competition This competition,announced in 2020,will provide funding for technologies that enable the removal of GHGs from the atmosphere.Total budget is up to

229、 GBP 100 million(approx.USD 127 million).Net Zero Innovation Portfolio The Net Zero Innovation Portfolio provides funding for low-emissions technologies and systems.It focuses on ten priority areas:future offshore wind,nuclear advanced modular reactors,energy storage and flexibility,bioenergy,hydrog

230、en,homes,DAC and GHG removal,advanced CCUS,industrial fuel switching,and disruptive technologies.CCUS Vision The CCUS Vision lays out a comprehensive strategy in developing a competitive market for CCUS through three different phases while detailing the evolving role of governments and the private s

231、ector.Greenhouse gas removals(GGR)business models The UK government designed the proposed commercial framework for GGR to address the gap between the cost of removal and the achieved sales price of negative emissions credits on carbon markets.The UK government will publish further details on the pol

232、icy and its measurement,reporting and verification methodology in 2024.United States Inflation Reduction Act The 45Q tax credit(introduced in 2008 and expanded in 2022)provides up to USD 85/t CO2 permanently stored and USD 60/t CO2 used for enhanced oil recovery or other industrial uses of CO2.The c

233、redit amount significantly increases for DAC projects to USD 180/t CO2 permanently stored and USD 130/t for used CO2.California Low Carbon Fuel Standard(LCFS)DAC projects anywhere in the world are eligible to receive LCFS credits,provided the projects meet the requirements of the Carbon Capture and

234、Sequestration Protocol(including 100 years of storage monitoring).The LCFS credits traded at an average of around USD 200/t CO2 in 2020.The Role of Carbon Credits in Scaling Up 2.State of play for low-emissions hydrogen,sustainable Innovative Clean Energy Technologies aviation fuels and direct air c

235、apture and storage PAGE|33 IEA.CC BY 4.0.Government/Jurisdiction Policy instrument Description United States(continued)Infrastructure Investment and Jobs Act This act,enacted in November 2021,includes almost USD 12 billion in CCUS support.This includes USD 3.5 billion in funding to establish four DA

236、C hubs(1 Mt CO2 per year and above)and related transport and storage infrastructure.DAC projects are also eligible for additional CCUS funding support included in the act of around USD 0.5 billion.The infrastructure package also fully funded the DAC Prize programme,with USD 100 million for commercia

237、l-scale projects and USD 15 million for pre-commercial projects.Carbon Negative Shot The United States announced this initiative at the 26th Conference of the Parties(COP26)in November 2021 as a call for innovation in technologies and approaches that will remove CO2 from the atmosphere and durably s

238、tore it at meaningful scales for less than USD 100/t CO2-eq,including DAC.DOE funding programmes The DOE announced multiple funding programmes specifically for DAC in March 2020(USD 22 million),January 2021(USD 15 million),March 2021(USD 24 million)and October 2021(USD 14.5 million).Voluntary Carbon

239、 Dioxide Removal Purchase Challenge In March 2024,the US DOE launched the proposed Voluntary Carbon Dioxide Removal Purchase Challenge,which features a leader board for voluntary carbon removal purchases.The DOE will also evaluate carbon removal credit suppliers.California Carbon Removal Innovation

240、Support Program The California Carbon Removal Innovation Support Program aims to develop DAC technologies that use mechanical and chemical processes.Eligible projects include,but are not limited to technology research,development and demonstrations and implementation of prototype and pilot research

241、test centres.Source:IEA(2024),expanded from Direct Air Capture 2022.High capital costs are a major barrier to deployment of DACS at scale.Other barriers to scale up adoption include the high energy consumption needed to separate CO2 through emerging separation technologies;the lack of identification

242、 and development of CO2 storage resources that are subject to permitting timelines;the lack of clarity on internationally agreed approaches for DACS certification and accounting;the speed at which safe and permanent dedicated CO2 storage can be developed;and the lack of a clear assessment of the rol

243、e of DACS in national net zero strategies.The Role of Carbon Credits in Scaling Up 3.Financing needs and mechanisms for nascent technologies Innovative Clean Energy Technologies PAGE|34 IEA.CC BY 4.0.3.Financing needs and mechanisms for nascent technologies Investment needs and sources of finance Al

244、though the overall share of investment needs for low-emissions hydrogen,SAF and direct air capture(DAC)in the IEAs Net Zero Emissions by 2050 Scenario(NZE Scenario)is only about 5%of total annual investments by the early 2030s,the growth compared to with current levels is enormous.The annual estimat

245、ed investment across these three technologies in 2023 was just USD 9 billion.This needs to increase to nearly USD 300 billion annually by the early 2030s under the NZE Scenario,and nearly USD 700 billion by 2050.In 2050,nearly three-quarters of the investments will be required for low-emissions hydr

246、ogen and hydrogen-based fuels,with DACS making up about 20%and SAF just over 6%.In the early 2030s,the share of SAF investments is higher at 18%,while DACS is slightly lower at 14%.Annual investment needs for hydrogen by technology and region in the Net Zero by 2050 Scenario,2022-2050 IEA.CC BY 4.0.

247、Notes:Other EMDE=other emerging market and developing economies.Investments in hydrogen-based fuels include investments in hydrogen-based SAF and ammonia and also investments in electrolysers.The values in this set of figures and the one following should not be added together as it would lead to dou

248、ble counting.Regionally,in the NZE Scenario,advanced economies lead investments for hydrogen and hydrogen-based fuels over the next decade,with emerging market and developing economies(EMDE)accounting for a growing share of investment needs to 2050 and hence the focus later in this chapter on soluti

249、ons to mobilise 010020030040050060020232030203520402050USD billionLow emissions hydrogenHydrogen based fuels010020030040050060020222030203520402050Advanced economiesChinaOther EMDEBunkers and shippingby technologyby regionThe Role of Carbon Credits in Scaling Up 3.Financing needs and mechanisms for

250、nascent technologies Innovative Clean Energy Technologies PAGE|35 IEA.CC BY 4.0.investment and finance to EMDE.In addition,the Peoples Republic of China(hereafter,“China”)also sees a steady increase in investments for hydrogen and hydrogen-based fuels to decarbonise the hard-to-abate sectors of heav

251、y industry,aviation and shipping.EMDE currently account for the largest share of investments in biofuels and have the potential to play a leading role in developing SAF,where investments are expected to continue outpacing those of advanced economies.Overall investment needs in DAC continue to grow s

252、ubstantially to 2050,while investment needs for SAF peak around 2035 with investment needs in EMDE growing over time.Annual investment needs for DAC and SAF in the Net Zero by 2050 Scenario,2022-2050 IEA.CC BY 4.0.Notes:Investments in SAF and DAC do not include the cost of low-emissions power as pro

253、jects may purchase electricity from the grid or invest in dedicated low-emissions power capacity.Including the investment needs for the electricity to power the plants would increase capex needs by about 20%for DAC and can lead to as high as a doubling in the investment cost for hydrogen-based SAF.I

254、nvestments in electrolysers for hydrogen-based SAF are not included here but captured in the previous chart under investments for hydrogen-based fuels.The investment values for hydrogen-based SAF are also included in the previous chart and these two figures should not be added together as it would r

255、epresent double counting.Investment needs for low-emissions hydrogen,SAF and DACS in EMDE(excluding China)reach nearly USD 90 billion annually in the NZE Scenario by 2030,up from just USD 0.14 billion in 2023.Under the Stated Policies Scenario(STEPS),which reflects todays policy settings,investments

256、 in these technologies reach just under USD 9 billion in EMDE in 2030,split between investments in low-emissions hydrogen and in SAF,and a negligible amount towards DACS.The high cost of these emerging technologies,combined with higher financing costs,points to an important investment gap in EMDE be

257、tween the STEPS and the NZE Scenario of just under USD 60 billion annually more than a sixfold increase in investment levels between the two scenarios.With other competing demands for limited public funding within and outside the energy sector,alternative mechanisms will be required to help fill the

258、 investment gap for these more expensive technologies that are critical to achieve net zero emissions in the hard-to-abate industry and transport sectors.Carbon credits could offer an 02040608010012014016018020232030203520402050USD billionSAFDAC02040608010012014016018020232030203520402050Advanced ec

259、onomiesChinaOther EMDEBy technologyBy regionThe Role of Carbon Credits in Scaling Up 3.Financing needs and mechanisms for nascent technologies Innovative Clean Energy Technologies PAGE|36 IEA.CC BY 4.0.attractive option to help fill or narrow this gap by providing additional revenues that can help b

260、ring down the high cost of project development and shift more capital to EMDE for financing net zero transitions.Investment gap in EMDE(excluding China)in the Net Zero by 2050 Scenario versus the Stated Policies Scenario,2030 IEA.CC BY 4.0.Note:STEPS investments include investment needs under the IE

261、A Stated Policy Scenario for SAF,hydrogen,hydrogen-based fuels and DACS.Investments in hydrogen-based SAF is included only under SAF to avoid double counting.Establishing markets and suitable business models for these technologies over the next decade is critical if their contributions to meeting de

262、carbonisation needs in the hard-to-abate sectors are to be scaled to the levels necessary by 2050.Governments and industry will need to work closely together to design targeted financing mechanisms that can spur early development and encourage rapid adoption globally.Delaying investments could lead

263、to higher costs in the long term.Equity dominates early financing,while debt financing grows in later years The early development phase of new technologies tends to rely heavily on equity financing,with the share of debt financing rising as technology reaches maturity and revenue streams can be secu

264、red through long-term purchase agreements.With a single low-emissions hydrogen project requiring upwards of USD 1 billion in capital,financing needs to be backed by long-term offtake contracts.Funding sources are expected to follow a similar path to financing of wind projects,with project finance an

265、d debt financing assumed to reach around 30%by 2050.Financing sources for SAF are expected to follow that of biofuels in their early development,shifting towards that of the refinery sector as demand for SAF becomes more established.Corporate finance is expected to dominate with a high share of equi

266、ty financing in the development period,followed by rising shares of debt financing reaching levels of about 50%once the technology matures.10 20 30 40 50 60 70STEPSNZE additions20232030DACSAFHydrogen based fuelsHydrogenLineUSD billionThe Role of Carbon Credits in Scaling Up 3.Financing needs and mec

267、hanisms for nascent technologies Innovative Clean Energy Technologies PAGE|37 IEA.CC BY 4.0.State-owned enterprises(SOEs)currently play an important role in biofuels development in EMDE and are also expected to be significant producers of SAF.Public sources of finance today account for over 30%of al

268、l financing for SAF and about 6%for hydrogen.The role of SOEs is expected to decline over time for SAF as the technology matures and demand rises with private developers playing a growing role.For hydrogen,production is expected to shift over time towards EMDE with cheap solar and wind resources,in

269、part through exports of hydrogen-based fuels.In these markets,SOE utilities dominate the power sector,and these players are expected to remain influential in the NZE Scenario.The role of SOEs in DAC remains limited given the very high cost of the technology and limited applications focused on achiev

270、ing net zero emissions for heavy industry and the oil and gas sectors,where the private sector is assumed to continue leading developments.This,however,may change in the future if major oil and gas companies in large producing countries get involved in deployment.Sources of finance and project spons

271、ors for hydrogen,hydrogen-based fuels,SAF and DAC,2022,2030,2035 and 2050 IEA.CC BY 4.0.While first-of-a-kind(FOAK)projects are expected to rely heavily on public sources of finance,limited public funding can be most effectively used to leverage higher multiples of private capital.This can be achiev

272、ed by focusing on project de-risking through first-loss tranches and revenues or off-taker guarantees to help establish new business models.Financing from development finance institutions(DFIs)will be needed to support projects in EMDE where local capital markets tend to be shallow and insufficient

273、to finance investments of this scale.These limited funds could provide targeted support for project preparation and project structuring to meet the requirements of international funders.In addition,DFI financing could also provide guarantees to help manage country and project risks such as delays in

274、 securing land access,permitting,currency and regulatory risks.0%10%20%30%40%50%60%2022203020352050HydrogenSAFDAC0%5%10%15%20%25%30%35%40%2022203020352050Share of debt financingShare of SOE project sponsorsThe Role of Carbon Credits in Scaling Up 3.Financing needs and mechanisms for nascent technolo

275、gies Innovative Clean Energy Technologies PAGE|38 IEA.CC BY 4.0.Role of domestic and international public finance Strong government incentives including grants,subsidised loans and loan guarantees have played a major role in the financing and development of low-emissions hydrogen projects around the

276、 world,mainly in advanced economies and China that accounted for over 90%of these investments in 2023.The combination of high capital costs and technology risk for these FOAK commercial-scale projects may require substantial public financing for projects to help pass the economic hurdle to enable a

277、final investment decision.However,economic development in EMDE outside China will drive much of the growth in emissions in hard-to-abate industry and transport sectors.These countries often do not have the same fiscal capacity to provide public funding for the uptake of emerging low-emissions techno

278、logies and will need to rely more on international public funding to help deploy and scale these technologies to the level required in the NZE Scenario.In the United States(US),the implementation of the US Inflation Reduction Act is likely to increase the share of funding via tax credits.This policy

279、 is particularly targeted at incentivising local manufacturing for low-emissions technologies and is expected to have a major impact on the development of low-emissions hydrogen and DACS with targeted elements of the programme covering DACS and hydrogen.In addition to this programme,the US Departmen

280、t of Energy announced up to USD 1.2 billion in funding for the development of two commercial-scale DACS projects that are intended to support the development of regional DACS hubs in Texas and Louisiana,in an effort to help these regions transition their industry from fossil fuels towards clean ener

281、gy.In the European Union(EU),policies such as the EU Emissions Trading System and the carbon border adjustment mechanism also help to support the investment case and close the green premium.Japans climate transition bond framework also helps to raise additional public funds for financing low-emissio

282、ns technologies as well as to help leverage private capital.DFI financing for technology uptake in EMDE For SAF,the International Civil Aviation Organization(ICAO),an intergovernmental organisation under the United Nations,has been actively engaging with leading public and private financial institut

283、ions to raise awareness and explore potential financing solutions.ICAO has estimated that the aviation sector will need USD 3.2 trillion in cumulative investments between now and 2050 to replace fossil fuels.Decarbonising the aviation sector will require all regions to transition to SAF,requiring an

284、 internationally co-ordinated approach that takes into consideration affordability among consumers in advanced,emerging and The Role of Carbon Credits in Scaling Up 3.Financing needs and mechanisms for nascent technologies Innovative Clean Energy Technologies PAGE|39 IEA.CC BY 4.0.developing economi

285、es.Governments and industry will need to work together to develop clear criteria and harmonised frameworks to facilitate SAF financing,providing private investors with confidence on the sustainability of projects and lowering risks.Public financing can be used to manage risks related to off-takers,r

286、evenue predictability and lower financing costs for FOAK projects and to improve the risk-adjusted returns to raise private capital in early projects.With the worlds lowest cost solar and wind potential,EMDE such as Chile,Namibia and South Africa,among others,are also actively developing and funding

287、 low-emissions hydrogen projects with technical and financial support from multilateral development banks.DFI financing to these countries in the form of grants,concessional loans and guarantees are needed to help develop markets and lower the cost of financing for these nascent technologies,as the

288、cost of capital for clean energy can be more than two times higher than in advanced economies.Chapter 2 provides a comprehensive overview of various government-backed incentives and programmes for low-emissions hydrogen,SAF and DACS.Private sector initiatives A number of industry-led initiatives als

289、o exist to accelerate investment and finance of SAF,low-emissions hydrogen and DACS projects.For example,a consortium of growth investors,including Carbon Direct Capital,Lightrock,GenZero and Kibo Investments,have invested USD 40 million in Velocys,a leading SAF technology company,to accelerate the

290、deployment of its technology to customer projects and to scale its production.The International Airlines Group(IAG)also announced a USD 400 million investment over the next 20 years in SAF development with British Airways,partnering with SAF developers.SAF fuel consumption commitment levels,such as

291、those made by IAG to reach 10%SAF consumption by 2030,are essential to establish a reliable demand outlook for SAFs.All Nippon Airways has also entered into a three-year purchase agreement for CO2 removals from DAC to begin in 2025.Offtake agreements from the airlines need to back these commitments

292、for project developers to be able to secure financing.Such corporate targets and early adoption coalitions have been critical in the early adoption and wide deployment of renewable energy.For example,the RE100 initiative has helped to establish and quickly grow demand for renewable power globally.Fo

293、r DACS projects,private-led initiatives supported by philanthropic foundations such as X-Prize and Breakthrough Energys Catalyst programme have been active in financing DACS start-ups,while the oil and gas company Occidental acquired Carbon Engineering last year and is using its technology to build

294、the worlds largest DACS project in Texas.These projects may also be eligible for tax incentives and grants under the US Inflation Reduction Act.The Role of Carbon Credits in Scaling Up 3.Financing needs and mechanisms for nascent technologies Innovative Clean Energy Technologies PAGE|40 IEA.CC BY 4.

295、0.Financial sector initiatives for SAF and other low-emissions technologies Recognising the key role that the financial sector will need to play in supporting new clean energy technologies,a number of different financial institutions around the world are developing targeted financing vehicles for SA

296、F technologies.For example,the Bank of America plans to mobilise USD 2 billion in sustainable finance by 2030 for the production of SAF and other lower-carbon aviation solutions.The First Abu Dhabi Bank also announced plans to finance more than USD 75 billion in low-emissions aviation(including SAF)

297、by 2030.Finally,Banque de Montreal has a sustainable finance guarantee programme that covers 50%of the risk of the loan up to USD 60 million with bioenergy,carbon capture and storage,and hydrogen as eligible sectors.Financing partnerships led by philanthropic foundations targeting nascent technologi

298、es Philanthropic foundations have been instrumental in mobilising both philanthropic and private capital to finance investments in new technologies critical to meeting net zero transition goals.With patient capital and a high-risk threshold,philanthropic foundations prioritise high social gains whil

299、e aiming to support emerging technologies that have the potential to reach wide-scale commercialisation.The worlds leading business leaders and investors,who have created some of the worlds largest corporations and investment funds and play an important role in mobilising private capital for the ene

300、rgy transition,lead these foundations.In 2015,Bill Gates,together with other foundations and private investors,created Breakthrough Energy Ventures to pool capital together to finance the clean energy transition.Breakthrough Energy Ventures currently manages three funds with total capital of USD 2.3

301、5 billion.The Breakthrough Energy Catalyst programme manages USD 1 billion of these funds targeting large demonstration and FOAK commercial-scale projects that can displace fossil-intensive industries.In Europe,the Breakthrough Energy Catalyst Partnership funded by the Breakthrough Energy Catalyst,E

302、uropean Investment Bank and European Commission provides venture debt to small demonstration projects(EUR 30 million to EUR 100 million)and equity and quasi-equity finance for FOAK commercial-scale projects(EUR 100 million to EUR 1 billion).The partnership targets SAF,low-emissions hydrogen,DACS,and

303、 long duration energy storage projects.It seeks to mobilise EUR 820 million in investments between 2023 and 2027.The Bezos Earth Foundation funded in 2020 the Mission Possible Partnership coalition to agree and act on decarbonising industry and transport.The World The Role of Carbon Credits in Scali

304、ng Up 3.Financing needs and mechanisms for nascent technologies Innovative Clean Energy Technologies PAGE|41 IEA.CC BY 4.0.Economic Forum,We Mean Business,the Energy Transition Commission and the Rocky Mountain Institute lead the coalition of climate leaders and companies.The coalition has developed

305、 industry-backed net zero strategies in seven heavy industry and transport sectors.The partnership is engaging with financial institutions to decarbonise the hard-to-abate sectors,adopt collective lending and investment policies that are in line with net zero sector roadmaps,and develop transition f

306、inance mechanisms to finance near-term pilot projects,and working with public and private financial institutions on innovative deal structures to support projects in hard-to-abate sectors.Innovative financing mechanisms Targeted and innovative financing mechanisms that can allocate or manage various

307、 risks such as technology,off-taker,revenue,currency and regulatory risks to stakeholders most able to manage these risks are needed in the development of SAF,low-emissions hydrogen and DACS.Funding platforms that combine public,private and philanthropic funds can help manage different risks by pool

308、ing funds and targeting limited public and philanthropic funds to take risks that private investors are unwilling to bear such as regulatory,off-taker and revenue risks.Domestic and international partnerships will be needed to accelerate development of these technologies,with national and regional p

309、artnerships focused on supporting domestic industrial development and international partnerships aimed at mobilising funding in EMDE where much of the future growth of carbon-intensive industries will take place.Public and philanthropic funds can be used to provide early-stage development grants for

310、 pilot projects,as well as concessional funding in the form of convertible equity,subsidised loans or first-loss guarantees for FOAK commercial-scale projects,where demand and,hence,revenues may be uncertain for new technologies.They can also be used to provide various de-risking mechanisms in the f

311、orm of guarantees for currency,technology,off-taker and/or regulatory risks.Blending public,philanthropic and private capital in structures has potential to allocate risks efficiently to those stakeholders most able to manage these risks,leading to lowering the cost of capital for these technologies

312、.For example,public funding may be best placed to manage regulatory risks while philanthropic funds may be suited to manage technology risks.Blended finance for private capital mobilisation in EMDE Blended finance structures that target private capital mobilisation through the use of official develo

313、pment assistance funding should focus on commercial The Role of Carbon Credits in Scaling Up 3.Financing needs and mechanisms for nascent technologies Innovative Clean Energy Technologies PAGE|42 IEA.CC BY 4.0.technologies and are not suited to managing technology risks.6 The use of concessional fun

314、ding(e.g.grants for project development and structuring or concessional loans and guarantees)can help commercial technologies expand into new markets and near-commercial technologies establish market viability.Blended finance vehicles could help expand the production of SAF,low-emissions hydrogen an

315、d hydrogen-based fuels in EMDE by providing revenue and off-taker guarantees for FOAK commercial-scale projects.Careful consideration will be needed to ensure such vehicles do not take undue technology risks and focus on proven advanced biofuel technologies and proven electrolyser technologies in co

316、mmercial operations.Blended finance structures could also include the integration of high-quality carbon credits to provide additional revenues for projects in emerging and developing economies to reach commercial viability or enhance returns to levels needed to meet risk-adjusted return requirement

317、s.With the cost of capital for clean energy technologies in EMDE more than twice that of advanced economies,carbon credits for low-emissions hydrogen,SAF and DACS can push projects past the necessary return requirement to achieve project bankability.6 The Organisation for Economic Co-operation and D

318、evelopment(OECD)defines official development assistance as government aid that promotes and specifically targets the economic development and welfare of developing countries.The OECD defines blended finance as the strategic use of development finance for the mobilisation of additional finance toward

319、s sustainable development in developing countries.Concessional finance covers grants or concessional loans and equity that is priced below market rates or subordinated in liquidation and/or payment to senior lenders or preferential equity holders.The Role of Carbon Credits in Scaling Up 4.Role of ca

320、rbon credits in supporting adoption Innovative Clean Energy Technologies of nascent technologies PAGE|43 IEA.CC BY 4.0.4.Role of carbon credits in supporting adoption of nascent technologies This chapter provides a qualitative overview of how carbon credits can accelerate a scaled-up adoption of low

321、-emissions hydrogen,SAF and DACS.First,it provides a description of the latest developments in carbon credit methodologies for these technologies.It then elaborates an assessment of the quality of these credits.While the assessment of the quality of credits considers different project archetypes,eac

322、h projects specific characteristics and local context will influence the final evaluation.This report does not consider these factors,while recognising that these are crucial and relevant in real-world applications.The criteria used to assess credit quality in this report are partly based on the Int

323、egrity Council for the Voluntary Carbon Market(ICVCM)Core Carbon Principles(CCPs).They aim to highlight key considerations specific to the project archetypes,without referencing specific crediting methodologies,and do not substitute for any upcoming ICVCM CCP labelling system which might differ from

324、 the assessment of this report.This report assesses the following criteria for each project archetype to elaborate key considerations:additionality,permanence,robust quantification of emissions reductions and removals,avoidance of double counting,leakage,and sustainable development benefits.Low-emis

325、sions hydrogen carbon credits State of play of low-emissions hydrogen carbon credit methodologies As of April 2024,there is only one crediting methodology allowing the issuance of carbon credits from the production and use of low-emissions hydrogen,although many are under development.The Clean Devel

326、opment Mechanism(CDM)AM0124 methodology calculates emissions reductions from the production of hydrogen using renewable energy.Verra,Gold Standard and the China Certified Emissions Reduction standard are in the process of developing further methodologies that may involve low-emissions hydrogen appli

327、cations.The most comprehensive attempt to develop low-emissions hydrogen crediting methodologies to date is the Hydrogen for Net Zero(H2NZ)initiative.H2NZ aims to develop methodologies that cover the hydrogen supply chain,encompassing The Role of Carbon Credits in Scaling Up 4.Role of carbon credits

328、 in supporting adoption Innovative Clean Energy Technologies of nascent technologies PAGE|44 IEA.CC BY 4.0.production,transportation,storage and utilisation of low-emissions hydrogen and associated products(e.g.heating,clean steel production).The H2NZ initiative is in the process of developing its f

329、irst methodologies,which can be used by Verra and Gold Standard.Key low-emissions hydrogen carbon credit methodologies Standard Methodology/Initiative Status Remarks Clean Development Mechanism(CDM)AM0124:Hydrogen production from electrolysis of water The methodology is active.AM0124 calculates emis

330、sions reduction by producing hydrogen using renewables compared with a baseline scenario where hydrogen is produced using fossil fuels(e.g.coal).Verra,Gold Standard,China Certified Emissions Reduction Fuel switch methodologies E.g.Alternative Low-Carbon Fuels in Shipping,Hydrogen in Transport Method

331、ologies are under development.These methodologies focus on the utilisation of hydrogen to replace fossil fuels.Verra,Gold Standard Hydrogen for Net Zero(H2NZ)initiative Methodologies are under development.The H2NZ initiative will develop methodologies for applications and consider the emissions redu

332、ctions from the life cycle of producing low-emissions hydrogen.Carbon credit methodologies that account for the life-cycle emissions of low-emissions hydrogen across the entire value chain are complex because of the various possible combinations of the technologies and methods involved in production

333、,transportation,storage and utilisation of hydrogen.Due to a different level of baseline emissions,the utilisation of hydrogen in the chemical industry leads to different final emissions from its utilisation in steel and cement production.This results in differing volumes of emissions reductions.Further,the emissions profile of low-emissions hydrogen projects varies significantly depending on whet