Part 2: Why Attribute Certificates are No Longer Just About Electricity-- Certificates vs. Carbon Credits

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Hi and welcome once again to the Renewable Roundup podcast from
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Schneider Electric. I'm Russell Redding, Head of Energy Markets at ZYGO.
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Every week I aim to bring you a podcast with some top stories,
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critical sustainability topics, insights, and expert voices.
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So please, please hit subscribe button and don't miss
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a thing. I've been thinking about attribute certificates and
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what they really mean, so I was really pleased that Xander Dale, one of Schneider
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Electric's managing consultants, agreed to join me and share his
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extensive knowledge in the area. Those of you who
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listened to it will remember that part 1, we looked at what an EAC
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is, how the E is changing, and what
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was going on in SBTI version 2.0.
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This week in part 2, we're going to discuss why it's a hot topic
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and what the differences are between certificates and carbon credits, and we're going to
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finish up with some practical examples and some steps. If you're
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interested to learn more about EACs, this is the podcast for you.
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I hope you enjoy.
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Hi Xander, how are you today? Hello Russell, I'm very good,
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I'm very good, thank you. Super, thanks for joining me again for part 2.
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We're talking about, um, EACs. I was
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really interested last week that we talked all about,
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um, you know, what the E is. It's expanding,
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it's not just energy. We talked about what an environmental attribute certificate
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was, and obviously we then got into some exciting news and some exciting stuff
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around SBTi and what's that Um, so before we jump in to
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kind of part 2, which as I sort of kind of hinted
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on the last one, we'll talk about why the market's moving, some sector examples,
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um, commodity versus carbon integrity, some, you know, what it
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looks like and some practical next steps. Would you like
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to just introduce yourself once again for anybody who may
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have somewhat foolishly missed, uh, your insetting
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podcast, your last EAC podcast, or to be
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a bit like me who's just slept and can't remember who you are? It's a
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bold move to start with a part 2, isn't it? But hello everyone,
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my name is Xander Dale. I am a managing consultant here at
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SE Advisory Services, part of Schneider Electric. I am the offsetting
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and insetting service line lead, so I look after all of our
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offsetting strategy work, project development, and value chain intervention aspects
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as well. Fabulous, thank you very much indeed.
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So, Xander, we were talking about environmental attribute
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certificates. I'd be interested to know,
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you know, why it's moving up the agenda at the moment.
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You know, why is the, the conversation on EACs
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accelerating? I mean, I, I'm guessing it's because there's change
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and, you know, certain things are accelerating and changing, but,
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you know, What's going on right now? No,
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I think it's a key question and it's why I came banging on the podcast
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door saying we need to talk about this. But there's kind of
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3 connected reasons. I'd say that there's a big,
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big focus on Scope 3 and it needs practical delivery mechanisms.
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We've seen that within the SBTi Net Zero 2.0. We're seeing that across
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everyone's Scope 3s being large and we need
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to join up that thinking. There's a big push on energy intensive
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aspects of value chains as well.
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And companies need a focus
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and need ways of mitigating these large emitting
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areas that usually sit within their purchase materials,
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agriculture, logistics, fuels, or product use. And I think we
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see that defined within the SBTi Net Zero 2.0 as well.
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Second, I think we're seeing producers who are trying to scale
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these low carbon commodities. We know that
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they are needed. But at the same time, it's very tricky to
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kind of scale it to get it into the right hands of those who need
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it. And I think a recurring point during London Climate Action Week in
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2026 was that the technology may exist, but the
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projects are still struggling to secure that investment when kind of green premiums
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are kind of more uncertain. And that demand from the
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buyers is kind of fragmented. You know, some people are doing it to report
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to specific tenders, others doing it because it's the right thing, others because it's for
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targets. So, you know, that having been brought up with the SBTi Net
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Zero 2.0 and all the others, then that's the exciting part
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that there is going to be that push, but the producers need that
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funding. So they need that, that signal. And I think
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the third one, the market is developing faster than its infrastructure.
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And I've seen this firsthand where, you know, we're looking
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at different commodities,
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and a lot of them are just being calculated. That pool is being calculated on
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an Excel spreadsheet, which is obviously where most things start, but the
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demand has kind of kicked up. And so there aren't those kind of joint registries.
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I think looking at Silvera's survey
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on EACs, they stated that there were kind of 75%
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of producer respondents to their survey expected to begin issuing
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EACs within 3 years. And buyers indicated significant
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appetite through 2030. But the pricing benchmarks,
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registration, and some verification capacity is still a lot lower.
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And so that combination of demand and immature infrastructure
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creates opportunity, but also a lot of risk.
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And so, you know, that if there is a big push, that we need to
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start acting now. Okay, that, that makes sense.
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So what should listeners take from the market signals, would you say?
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Optimism, but caution, I would say.
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But, you know, not that scale is guaranteed. It's not. There are a lot
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of people talking about it. But, you know, it doesn't mean that it's— you're
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going to be able to go source low-carbon cement like that tomorrow.
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I'd say the kind of more useful conclusion is that supply ambition is
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definitely running ahead of the systems that it needs to make issuance
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and claims credible. So if you are kind of buying certificates, just be
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careful, make sure you're reporting and claiming in line with what is possible according
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to your targets and the other frameworks you report against.
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I think producers don't always have visibility
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of the demand. And so that's a lot of the work the SE Advisory Services
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does. We connect those who are looking to buy with those who are looking to
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sell. So that's a really kind of fun part of the role as
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well. But those who are selling, they need verified carbon
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intensity and not just some random label. It needs to be legit.
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It needs to be backed up. Is that EPDs? Is that LCAs?
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Base it on a clear methodology. And,
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you know, the final point there is probably that the SBTi is a major
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demand signal, but it's only just come out. And that doesn't—
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and that always is a push to scale something. We need to learn from the
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voluntary carbon market over the last 10 years. And, you know,
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make sure that the market integrity is created alongside
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that demand. Okay,
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that's, that's, that's fabulous. Um, I like optimism, even if it's
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cautious optimism. I think that's really good. Um, for me,
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I don't know if you've got any kind of examples,
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um, but I think if you had something where you could kind
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of maybe bring it to life for a few sectors, it'd be really interesting.
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I think sometimes those practical examples, um, for me,
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without— sometimes things seem a bit abstract, and I think when you actually talk about
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real things, it's helpful. So where, where do you think certificates might
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genuinely add values under? Uh,
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I think that there is, uh, there's a lot
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of different sectors that we're kind of covering, um, but I'll lean on steel
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and cement as I was talking to a steel and cement, uh, producer the other
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day. Um, so steel, um, low-carbon steel
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projects often need that long-term demand to finance
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the production. Um, you know, it is a large project to create
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steel. It takes a lot of money, a lot of energy.
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So it needs to know that they are going to be able to sell that
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steel at the end. So there's the physical kind of
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offtake from direct buyers, which is important.
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But then you need those certificate agreements to kind of bring in
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additional buyers that can't directly buy the steel.
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So they want people to buy the steel, have the steel, use the steel.
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But if they can't kind of do that, and those people might not want
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to do the claims, they can get that additional funding and kind of book that
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in for longer using that environmental
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attribute certificate process. If we look at cement,
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cement is a very local commodity. It's produced locally
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and needs to be used locally. You can't be shipping it around the world.
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You know, it is very heavy, it's very cost sensitive.
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I think the book and claim model we've
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seen can kind of help aggregate the demand where
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an eligible plant is not accessible to every buyer. So, you know, if you don't
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have someone in your local area, there are a lot of people who still need
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that green cement. But product comparability
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becomes kind of fundamental when we're talking about that. And I think Silvera's
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analytical finding in their recent kind of report
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saw that fewer than 2% of cement products in its dataset would
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meet a 500-kilogram CO2 equivalent per ton threshold on carbon
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intensity alone. And so, you know, obviously I'm kind of referencing Silvera's
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benchmark there and not a universal SBTi eligibility rule, but it
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kind of illustrates how sensitive the
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outcomes and the conclusions can be to product definitions and thresholds.
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And what I mean by that is basically, you know, we need that defined,
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what is low carbon? And so we need to be able to be comparing cement
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types and low-carbon commodity types across things.
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And cement's a very interesting one. Is it across a benchmark
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of cement, this is lower carbon, or is it just lower carbon than
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the previous cement that you were using on your sites?
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So there's a kind of few different examples of
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book and claim where it can add value, but there are still things
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that need to be sorted out and confirmed before wide-scale
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rollout, I think. That's interesting.
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So are there any other
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sectors that may be of interest? I mean, I kind
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of sort of saw a few bits around fuels and maybe the chemical
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sector. Yes, I mean,
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and this is kind of where we're seeing a big link with CBAM as well,
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which I won't go into in detail today. That's probably
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a topic for another time. But, you know, chemicals and fuels definitely add another
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challenge to to this, and I think
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it's because the processing stages and kind of the kind of
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wider pooled supply chains really make it difficult to
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know where you are using things. And so I used the, the, the shipping example
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earlier, but let's take an airline. Just because you fly on an airline and
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on a plane doesn't mean that plane is going to be using SAF,
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but you can still fund for an airline to use SAF and kind
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of get the right to report that and claim that. Even though you're not actually
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flying on that specific SAF-fueled plane.
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And so, you know, that's where the book-and-claim model could potentially help,
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but it needs to be kind of preserved and proportionate.
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And I think, yeah, it's all got to be aligned
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with the evidence and just not overstated.
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And it is tricky in those different bits. Yeah,
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I get that. And I think that's a good— that's in some ways a good
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analogy for that in saying, you know, you're taking action somewhere,
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you're fueling a plane somewhere with SAF, but you
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may not be on that plane yourself. And I kind of get that. Living kind
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of where I do, I also think that agriculture potentially seems quite
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complex. You know, commodities get aggregated,
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you know, landscapes produce all sorts of outcomes at once. Would you agree with that?
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Yes, and that's probably a lot of the work that I
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actually do. We kind of do call that more land sector
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strategy work, joining up the carbon, the water,
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the social, the biodiversity and nature aspects of different
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parts. And I think that comes into the environmental attribute certificate discussion because
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the forest, land and agricultural sector, so I'm going to call
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it the FLAG sector, that's really where activity pools
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and supply sheds are particularly useful. You know, if you're sourcing a coffee bean,
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you might not be able to trace it back to that coffee plantation.
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You're going to go through an aggregator in the middle. And so,
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you know, you're not necessarily able to trace it.
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Credible interventions within the agricultural kind of point
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of view is lower carbon, lower emission fertilizer, methane reduction,
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regenerative agriculture, soil management, agroforestry,
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etc., etc. Water retention, very topical right now,
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and landscape restoration. These are all kind of key parts that the
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agricultural value chain can focus on. But integrated
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action does not make,
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you know, these environmental attributes interchangeable.
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So if you're looking at it, one program of work that's
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kind of operating over a few different farms could generate that carbon,
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water, biodiversity, soil health, and resilience benefits.
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And each of those kind of claimed attributes still need to
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be defined by what we discussed earlier: units, boundaries,
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baselines, methodologies, monitoring, ownership, etc.
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And I think that attribute stacking can become
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several organizations counting the same intervention in different ways,
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e.g., someone is funding someone to carry out regenerative agriculture,
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increase the water retention within soils. One organization might be claiming
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the carbon, someone else might be claiming the water savings, someone else might
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be claiming any biodiversity and nature benefits there. Ideally,
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you'd be thinking it'd be one organization claiming what they're funding and
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trying to push that out. But I think the agricultural value
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chain is a really, really interesting one because it links a lot of
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those wider attributes, not just carbon.
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It's a developing area that I'm working very hard on.
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Excellent. I like it. It's— I think it was right. Obviously, it is
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complex, which is, you know, it kind of
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needs to be understood, which is good. So just moving
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on a little bit around the kind of commodity certificates
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versus carbon credits. Briefly, I imagine
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that some people are going to hear all this and just go, well,
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isn't this simply the carbon market with a different label?
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No, but it's similar. And I think, you know, when the second
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draft of the SBTi Net Zero 2.0 came out, it did throw in carbon credits
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under environmental attribute certificates. So that's where kind of some of the kind of confusion
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is. And I think there's a lot of learning earnings from the voluntary carbon market
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that we can take. So, you know, the infrastructure integrity requirements
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are kind of probably very similar, but the actual instruments are very different.
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I think I would kind of attribute it to like for like.
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So, you know, you're not, you're not kind of protecting a forest for,
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you know, burning oil in an office, for example.
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It is you are purchasing low carbon steel certificates to
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link up with your low carbon steel. And that is attributed
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to your value chain. While, you know, the wider benefits of carbon credits
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is beyond that, kind of supporting global net zero.
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And then any claim you're making against that, this is within
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your value chain. So it is very similar,
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but I would say it's more like for like rather than just
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wider kind of carbon reduction avoidance or removal
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projects globally. Right. And do either
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instrument reduce your— or a company's reported
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inventory even automatically?
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No, no, no, no. So I think the
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carbon credits, to kind of talk about the elephant in the room, there was a
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blog post put out at one point that carbon credits could help organizations meet their
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targets. But I think that's been walked back now. And what we're seeing
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is carbon credits support that. The purchase of that, the internal carbon
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pricing, the bringing in of the kind of ongoing emissions responsibility and
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mandatory neutralization is a really good way of saying, hey,
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reduce your footprint quicker. And you will have to
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pay less to buy carbon credits off the market for
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this ongoing emissions responsibility, for example. So it's a really good tool
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to leverage decarbonization. While the market-based
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instruments and environmental attribute certificates, they have now been confirmed
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that they can be utilized within targets. And we'll wait for the
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SBTi to kind of fully confirm what that looks like. But within
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that mitigation hierarchy, it can be encountered within inventory
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and can be accounted as part of your targets. Okay,
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cool. Um, thanks for that. So in terms of claiming
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and, and what, what companies doing, if a company is
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considering looking at an EAC, what do you,
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would you say it should test before it buys or makes a claim?
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I would start with, um, start with matching. So, you know,
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is it the same activity type? Uh, is it the same
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product, material, fuel, et cetera? You know, and is it part of
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the underlying kind of activity. Can you link it to your value chain?
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Can you link it to specific geographies, to relevant systems, etc.?
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And don't stretch that, you know, really have that built in.
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The next up I would say would be quantification.
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So use a recognized methodology, be transparent, and list
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it out. I appreciate that's probably a few more NBs under
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GHG inventories in annual reports. And I think, you know, according probably
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linked into basis of reporting, reportings, et cetera.
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But just linking that up with clear requirements and clear methodologies for
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the quantification aspect is going to be really, really important.
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And so where obviously people are listening to this and thinking, okay,
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you know, I'm hearing that. What, what would you say is the
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danger zone? Where do companies often get, you know, just have
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a stumble or maybe get into trouble? Don't overclaim.
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You know, I think that that is the kind of key one. If we're
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looking at the SBTi Net Zero 2.0, that's a name that I keep saying over
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and over, but it's obviously very relevant right now. Um, you know, the claims
19:37.740 --> 19:40.420
guidance is due to come out, so if you want to make a claim before
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that, be transparent and maybe don't put it in your GHG inventory until you really
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see how the SBTi want it, for example. So just
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be transparent, don't overclaim, be specific on that claim.
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What are you doing? Where are you doing it? How are you doing it?
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What methodology? Has it been verified, etc., etc.? And just really kind
19:58.933 --> 20:02.577
of lay it out. So, you know, don't overclaim, be transparent,
20:03.171 --> 20:06.704
and ensure that the actual underlying data is robust. And if it's not,
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again, links back to being transparent. Yep, I guess that makes sense.
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So if someone is listening to this, Xander,
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and is wondering where to start and what
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kind of, I don't know, process to follow, what would be your
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sort of experienced view of a practical sequence being?
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I think this is, you know, this is another mechanism and opportunity
20:32.554 --> 20:35.232
to help fuel decarbonization,
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but it depends on where you are within that process.
20:39.546 --> 20:42.096
So, you know, you need to know where you are, then you need to know
20:42.176 --> 20:45.047
where you're going, and then you can start working out how you're going to get
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there. So start with your emissions, then make sure you've got your target, and then
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you can start looking at decarbonization levers within your activity level.
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So in your operations and within your visible value chain.
20:57.892 --> 21:01.450
Within your activity pool where you can't do it to kind of push that
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within the kind of wider sourcing regions, for example. And then if
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you've kind of still pushing and you need to think about the future, that's when
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you can start looking at the sector level. So very much linking to that
21:12.780 --> 21:16.562
mitigation hierarchy. If you are looking at
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certificates, just make sure it's useful and specify properly what
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unit. Is it carbon? Is it biodiversity and nature? Is it water? You know,
21:25.216 --> 21:28.469
what is the product? What is the geography you're sourcing from? When was
21:28.501 --> 21:31.948
this certificate made? What is the performance?
21:32.028 --> 21:35.781
What's it based on? What's the methodology, etc., etc.? Do your
21:36.281 --> 21:39.148
due diligence if you're going to do it. Ensure that it is robust and it
21:39.164 --> 21:41.970
isn't just someone saying, hi, I've calculated this and then,
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um, you know, on the back of a piece of paper and this product is
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really good. But I think we should be past that within the
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sectors that we're talking about. And I think, yeah, the accounting and
21:54.316 --> 21:58.340
claim at the end, again, as I said, base it against clear
21:58.388 --> 22:01.817
methodologies, demonstrate it as part of— as
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a short-term action within a long-term target,
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base it against clear methodologies, and ensure you're kind of
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aligning with the kind of local rules, regulations, and laws that
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are applicable to your organization and operations.
22:16.493 --> 22:19.554
So we're kind of getting towards the end of it. We've covered loads of stuff,
22:19.778 --> 22:23.079
um, not only in this one but obviously in part 1, which hopefully
22:23.579 --> 22:26.868
people listen to. So to wrap it What would
22:27.111 --> 22:30.561
be, please, Xander, your one final thought
22:30.609 --> 22:33.927
for anyone listening to this podcast? I think,
22:34.007 --> 22:37.694
you know, I wrote a blog about this, but the
22:37.871 --> 22:41.091
E still stands for energy. And I don't, you know, I think that's really,
22:41.172 --> 22:44.156
really important. And the energy market has kind of pushed this forward,
22:44.659 --> 22:48.112
but it increasingly stands for environmental as well.
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And that really, really allows and creates an
22:52.586 --> 22:56.922
opportunity to channel finance towards these lower carbon productions
22:57.115 --> 23:01.108
and other credible environmental outcomes that we're seeing associated
23:01.608 --> 23:04.620
with these different kind of products. And that's really, really important.
23:04.957 --> 23:08.293
And I think that gives a big opportunity. But we need to scale
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carefully, you know, no hand waving, no double counting, no trust me,
23:12.270 --> 23:16.007
this is green, based on evidence methodologies,
23:16.504 --> 23:19.728
clearly explained, transparently reported, and not overclaimed.
23:20.385 --> 23:23.482
So I think, yeah, Yeah, that's probably where I'll leave it.
23:24.144 --> 23:27.831
Credible action, properly evidenced, and with a clearer explanation
23:27.880 --> 23:30.952
of what you're trying to do, what the instrument is, and how it
23:31.452 --> 23:35.072
works. I think that's good. And I think perhaps, you know, maybe it's the analyst
23:35.572 --> 23:38.349
in me, I kind of, I get that. I think, uh, you know,
23:38.414 --> 23:39.938
understanding the evidence, you know,
23:41.407 --> 23:45.282
understanding what you're doing and having that sort of chain and knowing what's—
23:45.427 --> 23:48.413
what you've got, getting the evidence, keeping it all in track.
23:49.350 --> 23:53.270
And, and what you can claim, and, and obviously having clear explanations of what
23:53.770 --> 23:56.850
you've done and why. Because I think often, sometimes, um, and I've,
23:57.350 --> 24:01.010
I've sort of seen this in other things, people do, you know, people do things,
24:01.510 --> 24:04.290
we've done things, and you kind of think, go back to it later when,
24:04.790 --> 24:06.890
when it's questioned or it's audited, and people say, why did you do that?
24:07.390 --> 24:09.410
And if you've got the— if you've got that sort of stuff there, you go,
24:09.910 --> 24:11.550
well, we did it because this is what happened, this is what the advice was,
24:12.050 --> 24:13.530
and this is what we did, and we did it for these reasons. And sometimes
24:14.030 --> 24:17.150
you have all that, maybe you haven't logged it. So, um, now let's be really
24:17.650 --> 24:21.270
interesting. Uh, Xander, I, I want to say it's been an absolute pleasure talking to
24:21.770 --> 24:25.690
you again. I really appreciate it. I've really enjoyed it and I've
24:26.190 --> 24:29.670
learned loads of stuff on an area when I came in thinking, well, what's all
24:30.170 --> 24:32.610
this going to be about? And it's been really interesting. So thank you very much
24:33.110 --> 24:36.350
indeed. A pleasure. Yeah. And I do like
24:36.850 --> 24:40.210
to talk, so hopefully you'll invite me back at some point soon. Oh,
24:40.710 --> 24:44.230
definitely. I think there's probably loads more that people want to hear. So I think
24:44.730 --> 24:48.650
let's have a chat and sort something out. Definitely. So much exciting things happening
24:49.150 --> 24:52.739
across the kind of sustainability sector at the moment. So many, uh,
24:52.980 --> 24:56.884
interesting, exciting pieces of guidance, more to read, more to understand,
24:56.916 --> 25:00.739
and more to put into actual credible action. Excellent. And you're absolutely
25:00.771 --> 25:04.224
right. And I think people— I'm hoping, like I said, the Insetting podcast—
25:04.724 --> 25:07.758
there's another plug for that one if you're listening— um, has been one of our
25:08.258 --> 25:11.790
most popular ones. You know, Xander went through that in 2 parts in, in some,
25:11.870 --> 25:15.404
some great detail. So I reckon there's some more interesting stuff
25:15.904 --> 25:21.968
to cover. Looking forward to it.