Good morning everyone and welcome to this implement webinar. It's now 10 o'clock and we will be spending the next 30 minutes talking about the value of negative emissions together with you. We are so happy that so many have joined us this morning. Thank you for spending your time with us. And before we get started, could I ask you just to go into the chat, type in your name, your company and where you are in the world. That gives us a little bit of an impression of who sits behind the screen. And in the meantime, let's introduce the two of us. My name is Martin. I'm a partner with Implement Consulting. I've been working as a consultant in the energy and climate space for more than 15 years. And now for several years, focusing extensively on the areas around CCS, CCU, primarily with a focus on business cases and regulatory aspects. And I'm joined today by Christoph. Yes, thank you, Martin. My name is Christoph Jensen. I'm a senior consultant in Implement Energy and Climate Practice. I'm an economist and I've been working in the intersection between markets and regulation for more than 10 years. And for several years now, focusing on the CCUS space. Thank you. And thank you so much for chiming into the chat. We see a lot of activity. Most people located in Denmark, but we have also participants from France, we see, and Sweden. And more people chiming in. Thank you so much for joining us this morning. And I want to ask you one more thing before we really get started. And that is to answer the poll that will appear in front of you in just a few seconds. Answering which of these following groups do you think fits you the best? Are you working with a CCS project and either are in the early stage development or pre-feasibility? Then you answer one. Maybe you are more developed and doing feasibility studies. That's two. Or do you come from a company? Do you think it's a company that's considering buying negative emissions and either have a policy that you will only rely on negative emissions, for example, or don't have such a policy? Or do you belong to another category? Policy academia or something like that? So please just answer that question. We see some activity. Okay. Maybe not a clear picture at this stage, but let's just move on. Our expectation is that at least some of you will be working with CCS projects, probably also a lot in the other category, maybe from policy academia. An expectation is that only very few will be representing companies considering buying negative emissions, especially having a policy around this, because that is still quite rare at the moment. But let's just get jumping into the content. Christopher, will you kick us off? Yes. So today we are talking about the value of negative emissions. So let's start out by defining what is a negative emission. And to the left, you see the classic emission. So fossil fuel being extracted from the ground and burned, which emits CO2 into the atmosphere. That's a CO2 emission. And then we have the neutral case where biomass plants and trees absorb CO2 from the atmosphere. The biomass is then burned and the CO2 is re-released back into the atmosphere. So that's carbon neutral. And then we have the same case with the biomass absorbing the CO2. It is burned, but then you have installed carbon capture and you store the CO2 underground. That is what we call a negative emission. And as you see, there's a small fraction released into the atmosphere because it is not technically feasible or at least economically attractive to capture the full amount of CO2. But by far the main part can be captured and stored. So that's what we call a negative emissions. There are multiple examples of negative emissions. It's not only when fuels are burned. It's also forestation, enhanced weathering, what is called biochar. Then we have the bioenergy carbon capture and storage, which is what was depicted to the left. And then we have sort of the odd man out, the direct air capture, which does not involve biomass in any way, but captures the CO2 directly from the atmosphere. So now we know what a negative emission is. And then the next question, of course, is this important? And the short answer for this is yes. We see here, we've shown IPCC modeling scenarios for how to keep global temperature increases at 1.5 or at least at 2 degrees, which are what we deem as acceptable levels. And we see all these scenarios for how to get there. They involve significant amounts of negative emissions. And when we sum it up to the right, we see that in 2030, we will need in the area of one gigaton. So that's one billion tons of CO2 removed from the atmosphere. And in 2050, we get to a level of five gigatons. That's the equivalent of 10% of total global emissions currently. So that is a significant amount of negative emissions needed. And the longer we wait, the more negative emissions we will need, right? If we don't do something now, we will need to rely much more on these technologies as we move along. Exactly. And just to be clear of the scope here, we look here at the value chain of creating negative emissions. So first you capture the CO2, for example, from a point source, then you transport it either by ship or by pipeline, could also be truck. And then you have a choice. You can either store it permanently on the ground or permanently in, for example, materials with high permanence. But that is the negative emissions. But you could also choose to utilize it, for example, in producing green fuels or utilizing it in materials where the CO2 is re-released into the atmosphere within, say, a few years. That's not negative emissions. That's carbon neutral. So now we know what it is. We know it's important. We know how to create it. But the question is then, will we get it? And that will, of course, depend on the incentives for the market to create negative emissions. And here it's important to distinguish between the fossil CO2 and the biogenic CO2. Regarding the fossil CO2, we have the EU emissions trading scheme that puts a price on emitting fossil CO2. And that price is actually around 100 euros per tonne. And on top of that comes in some geographies national CO2 taxes. And that together actually creates quite a strong incentive. On top of that, there's public funding. The EU Innovation Fund has funded numerous CCS projects, both fossil and biogenic CO2 point sources. And there are also national schemes underway to support CCS. For example, in Sweden and Denmark. So the fossil share can also benefit from that. Looking at the biogenic share, we have the public funding. But the EU ETS and the CO2 taxes are not relevant here because of the biogenic CO2 is not counted as an emission. So we have to rely on either public funding or the voluntary carbon market, which is a marketplace for voluntary trades in climate projects that we will go deeper into in this presentation. So looking at a simple business case here, you can see to the left, we have the 100% fossil CO2, where when we take an example with the EU ETS and a national CO2 tax at the level, which it is expected to be in Denmark, we actually have a fairly small revenue gap, meaning it's not too far off that it could actually be a viable business case. There are, of course, many estimations of that, including the cost level, but that's our belief that we are not too far off. On the other side, you see the 100% biogenic CO2. There's basically no incentive from the national tax or the EU ETS allowance. So that relies only on public funding or the voluntary carbon market. And finally, there's a case of a mix. Here we've shown it as a 50-50 split. That could, for example, be a waste incineration plant that has both biogenic and fossil CO2 in the waste that is released when it's burned. Yeah, exactly. So for the negative emissions that arrive from storing the biogenic content, we need to rely substantially when looking at business cases on the voluntary carbon market. And what is that market really? That's what we'll talk a little bit about now. So in essence, the voluntary carbon market is a market where private companies can contribute to global climate projects, finance them, and thereby offset some of their own emissions in-house by making emissions reductions somewhere else. The idea is pretty good. So it's a way of getting companies involved in the global climate projects. And the marketplace, in essence, is relatively simple. So we have suppliers on one side, project developers that develop different types of emission reduction schemes. And then on the other hand, you have buyers that want to finance. And get a credit or certificate showing that they have been part of reducing emissions or even removing emissions somewhere else in the world. These two parties are then connected by a number of intermediaries, brokers, or even some marketplaces trading relatively standardized products. And then underneath all of this, there is a lot of different so-called voluntary regulation, where you have a number of different standards trying to set out the products and projects being traded, you have a number of registries where you surrender your credits to avoid double counting, for example. And all of this is in essence simple, but underpinned by a number of complicated structures. And what is one of the really important parts of the current way of the voluntary carbon market is that complexity in products is very, very high. So we don't see one product, we see a number of different products being traded on the market, they have different prices, and importantly, they have very different qualities. And this quality is a difficult thing to really define what does that mean. Sometimes it definitely means it has an impact, but it's actually also up to perception. What do we as society, what do we as companies, what do we as companies, believe is a high quality product is a high quality product? And a big challenge is that it's actually really, really difficult both to define, but also to monitor. So the projects that you go out and buy, what do they really generate after or in practice? And this means that it's really difficult to standardize the products on the market. It's difficult to trade them as liquidity or as commoditized products on markets. Hence, we have a number of different intermediaries, trying to broker between suppliers and buyers. And this complexity has also led to a number of questions to the actual impact of the market. A number of greenwashing accusations have rightly been made. And the concerns are linked to basically three different concerns. One is around additionality. Sorry. So can we be sure that the projects that we actually, the impact we actually see, that we seek to make, would not have happened otherwise. So clearly, if you are paying someone to not do what they otherwise say they would have done, there is a clear moral hazard risk in that. Secondly, there is a question around impact. So can we be sure that the actions that we are avoiding don't just move somewhere else? That the rainforest that we are protecting is not being cut down somewhere else? Can we be sure that the trees that we plant, they grow as intended? And can we be sure that the impact that we actually have is not just reversed again, for example, through forest fires? And then the third category is around fraud. So how do we make a system where market participants cannot cheat the system? So these are just some of the questions that have been brought forward to the market in general. But let's look a little bit at the numbers. What do they show about the market? And the numbers clearly show that the activity in the voluntary carbon market has accelerated the last two, three years, both in volume and in value, and value reaching almost 2 billion euros in 2021. Estimates for 22 are still uncertain, but suggestions point to volumes being traded around the same levels as in 2021. We see that the products that are traded on the market are substantially the avoidance credits. And avoidance credits basically mean the carbon neutral category that Christopher mentioned earlier. There are some removals, so negative emissions, and those emissions almost exclusively come from forestation projects. But what does that mean? But what does that mean if you sit, for example, with a bioenergy CCS project or a DOCS project? What can you use these figures for? How much value or certainty could you put into the voluntary carbon market being a source of revenue for your project? And here we see primarily two very important trends we want to highlight. The one trend, the first trend, is that we see a massive growth in companies, climate ambition, climate ambition. We see, for example, the 2,000 largest companies in the world are year by year committing a larger share of those companies to net zero targets. In Europe, for example, those of the 20 or 2,000 companies located in Europe, more than half have already committed to net zero targets. Other estimates point to that more than 80% of global emissions, are now covered by pledges committing to net zero. We have more than 15,000 companies being assessed by the CDP and more than 4,600 companies having committed to the science-based target initiative. So this means that a lot of companies are active here and many of these companies will want or need to rely on offsets from the voluntary carbon market to meet these targets. The second trend is that we see a major shift going from the relatively low quality products that are being traded today in the market, for example, many of the avoidance credits, to higher quality products. And as mentioned, it's a little bit difficult to define what is a high quality product or project. And one way to look at it is, for example, to look at the Oxford principles. They say, one, that we need a substantial or a trustworthy offsetting strategy need to go away from avoidance towards removal. So from carbon neutral to carbon negative. That's one thing you need to consider as a company. Another one is that we need to consider as a company. Another one is that we need to see a shift from the short-term storage solutions towards longer-term storage solutions. And basically that means a shift away from land-based removals, forestation, for example, towards the more novel engineered solutions where you store carbon for geological timescales. Other estimates point towards that if we actually were to fulfill all the country's climate pledges, we would need more land for carbon removals, we would need more land for carbon removals than the total size of the United States by 2050. So this is also a metric showing that clearly if we don't want to plant that much, many trees, we need other solutions. We need the novel solutions. And fourthly, and importantly, in our opinion, most of these novel solutions like, for example, BECCS and DAX, they are much easier to verify in terms of impact. So many or much of the reputational risk that is currently associated with voluntary carbon market products would be much lower for advanced solutions like BECCS and DAX. But as I mentioned earlier, what we see now in the market is currently very, very little or much forestation and avoidance credits being traded, but that is about to change, right? Exactly. Because we are actually seeing that companies are buying negative emissions and they are buying them at quite high prices. We put some examples here with Shopify, Stripe, Microsoft with very large scale and and Frontier representing a type of multiple companies coming together in a fund purchasing negative emissions upfront, helping also to provide the funding. And we've seen Airbus recently purchased also 400,000 tons of carbon removal. So there are actually a lot of cases showing that the interest is increasing and it's being traded at fairly high prices. So diving into that, we show here that we see these different products. So all the way to the left in the figure we see we have forestation being traded at various prices, but down as cheap as 20 euro per ton removed. And then we have in the other end of the scale, direct air capture being traded at up to 1000 euro and even in some cases above 1000 euro per ton. So that is that is the price. range also reflecting the quality that Martin mentioned that the additionality and so on is different for these products. So people are simply companies are willing to pay much more for high quality products. So going forward, we expect this price range to narrow and many drivers of this, but a key driver is of course, technological development, bringing down the cost of direct air capture and bio CCS. And also the fact that when it will be scaled into the millions of tons, we also expect the cost to come down significantly from the bottom, we expect actually the price of a forestation credits to come up because buyers will demand more strict regulation and more strict control. So the cheap, non credible credits will disappear from the market. And thus we expect it to end in a situation in 2035, having a price range of the different product in the market between something like 50 euro per ton, depending on your preference for product. And when we look ahead, we see a number of important issues that will be very, very interesting to follow. They will affect substantially the structure of this market and also the price expectation going forward. And one of these issues is around standards and methodology. for different types of projects for different types of projects. We've very recently seen the first standard for engineered carbon removals being published and also ICROA approved. That's really, really good news. It's been taking quite a lot of time to get some of these standards out there. And we will most likely see more standards following quite soon. And a very interesting question in that space is, will they be relatively similar in essence? Or will they be relatively similar in essence? Or will they be relatively similar in essence? Or will they be relatively similar in the same way? Or will they contain some important differences that makes it very important for project developers to decide what type of standards will we want to certify our project under? The second issue is around EU policy integration. We know that carbon removal will most likely become or play a major role in EU policies. But it's also concerning that it might take a lot of time for EU to get proper incentives to get proper incentives in place. We've just seen a relatively broad certification framework being published by the EU Commission. That is great. And now a lot of work needs to be done to make that framework practical. And then of course, there is a lot of discussion around should carbon removals be included in the EU ETS? That's a really important and interesting discussion. Again, here we don't see that materializing in the shorter term. What we do think is the key next step for that is a report published by the European Commission, which we envisage to be in around 2026. So don't hold your breath on EU ETS integration, at least until that and probably also much later. The third issue is around the timing of the supply of these advanced or high quality products, as well as demand. Because as we just mentioned earlier, basically today we have a market with very limited demand for these products. And we have also very limited supply. But if we are to go to one gigaton in 2030, a lot will need to happen. And it will be interesting to follow what will be then the timing of demand and supply. How do they come together? It's clear to see that many of the companies that are now setting 2030 targets, they need to meet them. And they will most likely need offsets to do so. If not, it will or if they don't meet them, it might be a huge or major corporate liability for these types of companies. This will drive demand. And it might also drive demand in the short term, such that these companies have the security and availability of the companies. of these credits in 2030 when they need them. At the same time, we see a lot of effort being put into developing carbon capture projects. They take time to develop, they take time to build. And it's going to be interesting to follow when they will start hitting the market with these relatively large quantities that we're actually talking about. And then the fourth point is around the utilization as an alternative, as Christophe also mentioned earlier. Clearly, it is an alternative. Should you sell your CO2 for utilization purposes or should you store it? And that's a difficult decision because it also depends on the value of selling your physical CO2, which is also highly uncertain at the moment. And it will be very interesting to follow that development, both for market drivers, but also the regulatory drivers that affect the price of physical CO2, such as, for example, the green fuel mandate for RFNBOs that is being put forward in the renewable energy directive. And rounding off this morning, we will narrow the focus a little to those of you who are part of developing a CCS project or who might become part of it in the future. And we pose four questions that need to be answered or we suggest that needs to be answered as part of this. And the first of all, it's important to ask, do you have a clear strategy for your CCS project? And is it cleared with your management and your owners? So is it clear why are they actually developing the CCS project? And importantly, is selling certificates for negative emissions a part of the strategy? And if that is the case, the second question is, is the revenue stream that could come from selling negative emissions, is it a requirement for obtaining the funding? Or is it just a possible upside later making the business case even better? And if it doesn't materialize this revenue stream, are there viable alternatives for your project, such as national or EU funding? Third question is, what type of agreement do you need to make with buyers of certificates for negative emissions? How many certificates per year do you need to demonstrate that you can sell before you can make an investment decision? How many years do you need the buyers to commit for? Is it enough for one year or do they in the extreme need to commit for the full lifetime of the project? And what kind of uncertainties can you accept? Can you accept that the price will be regulated at a later time to align with future market prices? Can you accept that there are exit clauses so buyers can potentially get out of their commitment? And finally, what requirements do you have for the buyers? Or more precisely, what requirements does your owners have? Do they have an opinion on who buys the certificates and what kind of emissions they can be used to offset? Does the regulations rule out certain types of buyers of your credit? And ultimately, what characterizes the optimal buyer of your credits? And importantly, how will you connect to them to make an agreement? Great, so that's actually the content that we have for you today. We have a few minutes left. I see that a lot of questions have already been posted in the chat. Please write more questions. Please write more questions. As we only have a few minutes, we will not be able to address, but we will come back to you afterwards with our response to the questions. So please hang around and type your questions. In the meantime, we'll look at some of them. The easy one is, will the PowerPoint be available after presentation? Yes, it will. And then I wonder which we might. So I think the question on the SBTI and the 2050 target, Net Zero target, I think that's a really important question. And that's also something that needs to be scrutinized a little bit. In my opinion, I think the SBTI requirement on this is actually not very helpful. Clearly, we need companies to reduce their own emissions first. That is a priority. The voluntary carbon market should not be something that you use as an excuse not to do something for your own emissions. But saying that we don't need removals before 2050, I think it's a little bit of a unhelpful. And I think we see many of the large, especially tech companies, as Christopher mentioned earlier, they are saying, we don't really care about this requirement. We know we need these types of credits. They are the future and the future is today. So the more we can go in and acquire and help finance this transition, the better. But time is up now. Please hang around. If you have questions, please hang around. If you have questions, put it in the chat and we'll make sure to come back to you again. Thank you. Thank you for today. Have a great day.