Dentons’ Environmental team has “stellar individuals that bring great experience and expertise. At the same time, they have an incredibly deep bench that they can call on from other parts of the firm. That ability to find someone in the Dentons network with proficiency in a new issue has been very valuable.”

- Client quote, Chambers Global

Adding revenue and addressing climate change by monetizing unquantified environmental attributes through carbon and greenhouse gas offsets.

Climate issues are increasingly significant for our clients’ business and activities. As we navigate our clients through these issues, many are surprised to learn that their own products and services represent an untapped revenue source—the opportunity to contribute to the global drive to mitigate the effects of climate change, including through:

• Enhanced manufacturing processes and intermediate components
• Use of exhaust gas waste to create intermediate chemicals to be made into durable products
• Sales, donations or deductions of commodities, such as offset credits
• Sponsoring of nature-based solutions to store carbon in soils, forests and through other means

The carbon offset solution

One way that companies can reduce their financial exposure to climate rules, existing and new, as well as address current climate change challenges is by reducing their carbon footprint through carbon offsets—credits for reductions not required by law and not “business as usual.” These voluntary reductions can be quantified and validated by a third party. As such, they are a type of environmental commodity that have many uses. In creating offset methodologies, we include the UN Sustainability goals for 2030.

The benefits of embracing carbon offsets include:

• Scientific method to quantify environmental benefit
• Brand, reputation and marketing
• Support a path to policy of net zero, as early reductions
• Position the company for potential use in a cap-and-trade-style market, or in reducing potential carbon tax exposure in later years or even to trade as other tax-credit instruments are transacted

How carbon offsets are used and leveraged can vary depending on the industry. Some real-world examples are provided below. It is important to conduct a feasibility assessment with experienced climate change counsel, to determine the next course of action.

Examples of application

• Construction: decarbonizing building materials, such as new cement mixes and materials
• Manufacturing: innovative measures to modify manufacturing methods to avoid use of high-GWP (global warming potential) gases and materials
• Nature-based offsets: including forestry and agricultural, enhanced soil conservation and fertilizer practices
• Oil and gas: capture and conversion of waste exhaust gases into a durable chemical intermediate
• Real estate: avoided deforestation, planned reforestation and afforestation, and enhanced agricultural practices
• Tribal: control of methane seeps and fugitive emissions from old wells

Carbon capture and sequestration

Dentons helped pioneer representation in the legal aspects of carbon capture and sequestration 15 years ago, representing the FutureGen Industrial Alliance in acquiring one of the first Class VI carbon dioxide injection permits issued by the EPA. Currently, we handle numerous matters across the United States for clients in a wide array of industries, including the largest global players in energy, oil and gas.

Carbon capture and sequestration can also qualify for federal tax credits. These credits were enhanced in value by recent legislation, which substantially increased the amount of the credit. The new legislation also provided for direct payment to qualified sequestration project participants and increased transferability, facilitating financing and joint project participation. In some instances, these credits can by stacked on carbon offset incentives. Carbon sequestration is proven technology and is already utilized on many projects across the United States.

Climate change and ESG reforms

An emerging consensus, from oil majors to financial institutions to real estate development, is that the world needs to be at “net zero” emissions of greenhouse gases by 2050 in order for the extant weather patterns of today to continue. This policy direction is seen in a variety of forums, including actions under consideration by the Securities and Exchange Commission and the Commodity Futures Trading Commission. Getting to “net zero” means that some actions will be necessary which take greenhouse gases out of the troposphere and into the soil or geologic formations -- or into new durable products made from waste gases.

Environmental, Social and Corporate Governance (ESG) are regarded as a source of risk, as well as opportunity globally, and are increasingly tied to business performance. Recent growth in ESG investing and other societal demands illustrate the corporate imperative to critically evaluate processes and enhancements. When doing such assessments, quantifying the environmental attributes of those new processes is recommended and the carbon offset methodology may provide the analytical tools. The good news is: ESG objectives can align with business objectives.

Insights

Government of Alberta releases draft protocol for CO₂ sequestration: Key updates and considerations

November 14, 2024

On November 1, 2024, the Government of Alberta (the Province) released the Draft Quantification Protocol for CO2 Capture and Permanent Geologic Sequestration version 2.0 (the Draft Protocol) for public comment.

US policy and principles for voluntary carbon markets demonstrate support

June 3, 2024

United States: On May 28, 2024, the White House released a Joint Statement of Policy and new Principles for Responsible Participation in Voluntary Carbon Markets (the Principles). The Principles outline the voluntary principles that US market participants should adhere to when engaging in the voluntary carbon market (VCM) and provide guidance on US government agencies' engagement with VCMs.

British Columbia's new Output-Based Pricing System

May 14, 2024

On April 1, 2024, British Columbia's new Output-Based Pricing System (OBPS) came into force and will replace the existing CleanBC Industrial Incentive Program (CIIP). The OBPS is an emissions pricing system based on performance and output and will be used to meet BC's climate plan outlined in the CleanBC Roadmap to 2030.

View all insights for Carbon Offset Credits and Carbon Capture and Sequestration