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Isometric is trying to become the most trusted name in the scandal-plagued carbon market.
Regulations are probably coming for the scandal-plagued voluntary carbon market. After years of mounting skepticism and reports of greenwashing, governments are now attempting to rein in the historically unchecked web of platforms, registries, protocols, and verification bodies offering ways to offset a company’s emissions that vary tremendously in price and quality. Europe has developed its own rules, the Carbon Removal Certification Framework, while the Biden administration earlier this year announced a less comprehensive set of general principles. Plus, there are already mandatory carbon credit schemes around the world, such as California’s cap-and-trade program and the E.U. Emissions Trading System.
“The idea that a voluntary credit should be a different thing than a compliance credit, obviously doesn’t make sense, right?” Ryan Orbuch, Lowercarbon Capital’s carbon removal lead, told me. “You want it to be as likely as possible that the thing you’re buying today is going to count in a compliance regime.”
That’s where the carbon credit certification platform Isometric comes into play. Founded in 2022, the startup raised $25 million in its seed round last year, co-led by Lowercarbon and Plural, a European venture capital firm. It has created a rigorous, scientifically-driven standard for carbon removal credits, with the intention of becoming the benchmark that buyers, sellers, and other stakeholders can coalesce around. So whenever federal standards or compliance regimes do kick in, there will be no doubt whether Isometric-verified credits are up to snuff.
“Isometric was basically founded to say, look, the long-term solution here is obviously government and regulation, but in the meantime, this is too important to let the market just keep doing it like this,” Lukas May, chief commercial officer at Isometric, told me. He believes that the government’s role in the carbon market should mirror the financial sector, but instead of preventing insider trading or predatory lending, federal regulators would make high-level determinations on things like what types of credits count and how long carbon must be locked away to count as “permanent removal.” Platforms like Isometric (often referred to as registries) could then focus on setting more granular, scientifically specific requirements for particular methods of carbon removal.
The startup aims to separate itself from existing registries, which include Puro.earth, Verra, and the Gold Standard, in two big ways.
First is just a focus on science. May said that 15 of Isometric’s first 25 hires were scientists. Today, the company’s chief scientist is Jennifer Wilcox, who recently left her position on the leadership team at the Office of Fossil Energy and Carbon Management, housed within the U.S. Department of Energy. Other registries, he told me, are “filled with NGO types” and “policy people” who lack the technical background to, say, evaluate what types rock formations are best for the geological sequestration of bio-oil or how CO2 fluxes in the soil impact enhanced rock weathering. These types of in-the-weeds analyses are integral to establishing stringent protocols to validate the amount of carbon that’s actually been removed.
Additionally, May, Orbuch, and Khaled Helioui, a partner at Plural who led the firm’s investment in Isometric, all said the company fixes a key flaw in the voluntary carbon market —- alignment of financial incentives. Traditionally, carbon removal suppliers pay registries to certify their credits, which creates an incentive for registries to overlook lax standards. But Isometric is instead paid a flat fee by the buyers for performing verification work on a per-ton basis.
This year, Isometric verified its first credits ever, from the carbon removal companies Vaulted Deep, which collects sludgy, organic waste and deposits it underground, and Charm Industrial, which injects processed biomass into abandoned oil and gas wells. Credits from these two suppliers were sold to Frontier, the carbon-removal initiative led by the payments firm Stripe. Just last week, Frontier identified Isometric as its first and only leading credit issuer.
“What makes Isometric stand out is they’re explicitly focused on durable CDR [carbon dioxide removal],” Joanna Klitzke, Frontier’s procurement and ecosystem strategy lead, told me. “Durable” refers to the fact that Isometric’s projects must sequester CO2 for 1,000 years or more. “They’re building tech products that make data and reporting particularly easy for suppliers and for credit management,” she added.
Everyone is essentially trying to avoid another scandal like the one that engulfed rainforest carbon offsets, which were found to be largely worthless. The industry has thus been shifting away from more nebulous carbon offsets, which seek to avoid future emissions by preventing deforestation or funding renewables development, and towards more concrete, but often more expensive, forms of carbon removal — think direct air capture, enhanced rock weathering, or biomass carbon removal and storage, all of which have seen a boom in investment.
“As carbon removal was emerging as a new and potentially very exciting way to do this stuff, potentially more measurable and more rigorous, we couldn’t just sit and watch the same registries do the same thing,” May told me, saying doing so would “destroy trust in the carbon removal industry before it’s even off the ground.”
In a past life, Isometric’s founder and CEO, Eamon Jubbawy, founded a digital identity verification company for the financial services industry. This gave investors confidence that he could bring his expertise in trust-building and verification services to the carbon removal space.
“It’s not a like for like, but there’s a lot of overlap in terms of actually introducing efficiency, effectiveness, and having technology really open a market,” Plural’s Helioui told me. “This is not an endeavor or an opportunity where I would have been necessarily that keen to back a first-time founder, just because of the complexity of what you need to manage,” he said. “We’re really talking about market creation.”
But May doesn’t expect Isometric to totally dominate other registries. Just like there are many private banks, May envisions an “ecosystem of high quality registries,” eventually unified around a set of federal guardrails. Until then, he believes Isometric’s role is to “set a bar that is so high that the expectation and norm in the market shifts,” thus avoiding a race to the bottom where companies are able to greenwash their image with cheap, low-quality credits.
Now, not every company can afford the highest quality credits. And because of Isometric’s 1,000-year storage requirement, many cheaper, nature-based projects, such as reforestation, are excluded from its registry, even though there’s still demand for them. Orbuch told me that Isometric will continue adding guidelines for different carbon removal pathways, as it recently did for biochar, a charcoal-like brick that locks up carbon contained within biomass.
It’s still early days, and there’s plenty of room for Isometric to grow alongside the market. After all, it’s only issued 5,350 carbon removal credits to date, while nearly two billion credits have been issued in the voluntary carbon market overall.
“The whole industry needs to be scaling up,” May told me. “So we need to, in 10 years time, be, you know, issuing and verifying hundreds of millions, if not billions, of credits annually.”
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Between the budget reconciliation process and an impending vote to end California’s electric vehicle standards, a lot of the EV maker’s revenue stands to go poof.
It’s shaping up to be a very bad week for Tesla. The House Committee on Energy and Commerce’s draft budget proposal released Sunday night axes two of the primary avenues by which the electric vehicle giant earns regulatory credits. Congress also appears poised to vote to revoke California’s authority to implement its Zero-Emission Vehicle program by the end of the month, another key source of credits for the automaker. The sale of all regulatory credits combined earned the company a total of $595 million in the first quarter on a net income of just $409 million — that is, they represented its entire margin of profitability. On the whole, credits represented 38% of Tesla’s net income last year.
To add insult to injury, the House Ways and Means committee on Monday proposed eliminating the Inflation Reduction Act’s $7,500 consumer EV tax credit, the used EVs tax credit, and the commercial EVs tax credit by year’s end. The move comes as part of the House’s larger budget-making process. And while it will likely be months before a new budget is finalized, with Trump seeking to extend his 2017 tax cuts and Congress limited in its spending ability, much of the IRA is on the chopping block. That is bad news for clean energy companies across the spectrum, from clean hydrogen producers to wind energy companies and battery manufacturers. But as recently as a few months ago, Tesla CEO Elon Musk was sounding cavalier.
After aligning himself with Trump during the election, Musk came out last year in support of ending the $7,500 consumer EV tax credit, along with all subsidies in all industries generally. He wrote on X that taking away the EV tax credit “will only help Tesla,” presumably assuming that while his company could withstand the policy headwinds, it would hurt emergent EV competitors even more, thus paradoxically helping Tesla eliminate its competition.
While it looks like Musk will get his wish, he probably didn’t account for a small but meaningful carveout in the Ways and Means committee proposal that allows the tax credit to stand through the end of 2026 for companies that have yet to sell 200,000 EVs in their lifetime. While Tesla’s sales figures are orders of magnitude beyond this, the extension will give a boost to its smaller competitors, as well as potentially some larger automakers with fewer EV sales to their credit.
A number of other provisions in the Ways and Means committee’s proposal spell bad news for Tesla and EV automakers on the whole. These include the elimination of the $4,000 tax credit for used EVs as well as the $7,500 tax credit for commercial EVs — which leased cars also qualify for. This second credit, often referred to as the “leasing loophole,” allows consumers leasing EVs to redeem the full tax credit even if their vehicle doesn’t meet the domestic content requirements for the buyer’s credit. The committee also wants to phase out the advanced manufacturing tax credit by the end of 2031, one year earlier than previously planned. While not a huge change, this credit incentivizes the domestic production of clean energy components such as battery cells, battery modules, and solar inverters — all products Tesla is heavily invested in.
The domestic regulatory credits that comprise such an outsize portion of Tesla’s profits, meanwhile, come from a mix of state and federal standards, all of which are under attack. These are California’s Zero-Emission Vehicle program, which sets ZEV production and sales mandates, the National Highway Traffic Safety Administration’s Corporate Average Fuel Economy standards, and the Environmental Protection Agency’s greenhouse gas emissions standards.
While the mandates differ in their ambition and implementation mechanisms, all three give automakers credits when they make progress toward EV production targets, fuel economy standards, or emissions standards; exceed these requirements, and automakers earn extra credits. Vehicle manufacturers can then trade those additional credits to carmakers that aren’t meeting state or federal targets. Since Tesla only makes EVs, it always earns more credits than it needs, and many automakers rely on buying these credits to comply with all three regulations.
It’s unclear as of now whether lawmakers have the authority to eliminate the federal fuel efficiency and greenhouse gas emissions standards via budget reconciliation. A Senate stricture known as the Byrd Rule mandates that provisions align with the basic purpose of the reconciliation process: implementing budgetary changes; those with only “incidental” budgetary impacts can thus be deemed “extraneous” and excluded from the final bill. It’s yet to be seen how the standards in question will be categorized. At first blush, fuel efficiency and greenhouse gas emissions standards are a stretch to meet the Byrd Rule, but that determination will take weeks, or even potentially months to play out.
What’s for sure is that California’s ZEV program cannot be eliminated through this process, as the program derives its authority from a Clean Air Act waiver, which was first granted to the state by the Environmental Protection Agency in 1967. This waiver allows California to set stricter emissions standards than those at the federal level because of the “compelling and extraordinary circumstances” the state faces when it comes to air quality in the San Joaquin Valley and Los Angeles basin. California’s latest targets — which require all model year 2035 cars sold in the state to be zero emissions — have been adopted by 11 other states, plus Washington D.C.
These increasingly ambitious goals would presumably cause the tax credits market — and thus Tesla’s profits — to heat up as well, as most automakers would struggle to fully electrify in the next 10 years. But the House voted at the beginning of the month to eliminate California’s latest EPA waiver, granted in December of last year. Now, it’s up to the Senate to decide whether they want to follow suit.
To accomplish this task, Republicans have called upon a legislative process known as the Congressional Review Act, which allows Congress to overturn newly implemented federal rules. Senate Majority Whip John Barrasso, for one, has been vocal about using the process to end California’s so-called “EV mandate,” writing in the Wall Street Journal last week that “it’s time for the Senate to finish the job.” And yet other Senate Republicans are reluctant to attempt to roll back California’s waiver. The Government Accountability Officeand the Senate Parliamentarian have both determined that the regulatory allowance ought not to be subject to the Congressional Review Act as it’s an EPA “order” rather than a “rule.” Going against this guidance could thus set a precedent that gives Congress a broad ability to gut executive-level rules.
During his first term, Tesla CEO Elon Musk stood in firm opposition to efforts to roll back fuel efficiency standards. But lately, as the administration has started turning its longstanding anti-EV rhetoric into actual policy, Trump’s new best friend has been relatively quiet. Tesla’s stock is down about 25% since Trump took office, as investors worry that Musk’s political preoccupations have kept him from focusing on his company’s performance. Not to mention the fact that Musk's enthusiastic support for Trump, major role in mass federal layoffs, and, well, whole personality have alienated his liberal-leaning customer base.
So while Musk may have staged a Tesla showroom on the White House lawn in March, awing the President with the ways in which “everything’s computer,” he’s presumably well aware of exactly how Trump’s policies — and his own involvement in them — stand to deeply hurt his business. Whether Tesla will make it through this regulatory onslaught and self-inflicted brand damage as a profitable company remains to be seen. But with Musk planning to slink away from the White House and back into the boardroom, and with House leaders hoping to complete work on the reconciliation bill by Memorial Day, we should start to get answers soon enough.
On gutting energy grants, the Inflation Reduction Act’s last legs, and dishwashers
Current conditions: Eighty of Minnesota’s 87 counties had red flag warnings on Monday, with conditions expected to remain dry and hot through Tuesday • 15 states in the South and Midwest will experience “extreme” humidity this week • It will be 99 degrees Fahrenheit today in Emerson, Manitoba. The municipality hit 100 last weekend — the earliest in the year Canada has ever recorded triple digits.
Republicans on the House Committee on Energy and Commerce released their draft budget proposal on Sunday night, and my colleague Matthew Zeitlin dove into its widespread cuts to the Inflation Reduction Act and other clean energy and environment programs. Among the rescissions — clawbacks of unspent money in existing programs — and other proposals, Matthew highlights:
Those are just a few of the cuts, which the Sierra Club estimates would add up to $1.6 billion for programs related to decarbonizing heavy industry alone. You can read Matthew’s whole analysis here.
Republicans on the Committee on Energy and Commerce weren’t the only ones who’ve been busy. On Monday, the House Ways and Means Committee, which oversees tax policy, proposed overhauling clean energy tax credits. Heatmap’s Emily Pontecorvo took a look at those proposals, including:
There’s much more, which Emily gets into here.
In response to President Trump’s executive order last week ordering the Energy Department to “eliminate restrictive water pressure and efficiency rules” for appliances, the DOE published a list of 47 regulations on Monday that it has targeted as “burdensome and costly.” Appliances regulated by the DOE’s list include cook tops, dishwashers, compressors, and microwave ovens, with the agency claiming the deregulation effort would cut 125,000 words from the Code of Federal Regulations and “save the American people an estimated $11 billion,”The New York Timesreports. By the government’s own accounting, though, efficiency standards saved the average American household about $576 on energy and gas bills in 2024, and reduced energy spending for households and businesses by $105 billion in total. “If this attack on consumers succeeds, President Trump would be raising costs dramatically for families as manufacturers dump energy- and water-wasting products into the market,” Andrew deLaski, executive director of the Appliance Standards Awareness Project, said in a statement. “Fortunately, it’s patently illegal, so hold your horses.”
Environmental Protection Agency administrator Lee Zeldin said Monday that the Trump administration plans to target stop-start technology in cars. According to the EPA’s website, start-stop technology saves fuel “by turning off the engine when the vehicle comes to a stop and automatically starting it back up when you step on the accelerator,” improving fuel economy by 4% to 5%, especially in conditions like stop-and-go city driving. Zeldin, though, characterized the technology as when “your car dies at every red light so companies get a climate participation trophy. EPA approved it, and everyone hates it, so we’re fixing it.” Neither Zeldin nor the EPA offered further details on what that might entail.
More than 2,100 climate adaptation companies generated a combined $1 trillion in revenue last year by offering products and services mitigating the risks of climate change, a new study by London Stock Exchange Group found. “One question that we are getting a lot at the moment is: ‘With the Trump administration in office, what does that mean for the green economy?,’” Jaakko Kooroshy, LSEG’s global head of sustainable investment research, told Bloomberg in an interview about the report. The answer is “this thing is now so big and so robust, it’s not going to implode just like that,” he added.
The analysis looked at 20,000 companies worldwide and “found that adaptation-related revenues last year accounted for roughly a fifth of the $5 trillion global green economy,” with green buildings and water-related infrastructure being the most significant contributors, Bloomberg adds. LSEG further noted that if all companies related to the “green economy” were considered their own industry group, they’d have had the best performance of any equity sector over the past decade.
Thermasol
Wellness company Thermasol has introduced the first off-grid, solar-powered sauna in the U.S., which can reach 170 degrees Fahrenheit in about half an hour.
Rob and Jesse digest the Ways and Means budget bill live on air, alongside former Treasury advisor Luke Bassett.
The fight over the Inflation Reduction Act has arrived. After months of discussion, the Republican majority in the House is now beginning to write, review, and argue about its plans to transform the climate law’s energy tax provisions.
We wanted to record a show about how to follow that battle. But then — halfway through recording that episode — the Republican-controlled House Ways and Means Committee dropped the first draft of its proposal to gut the IRA, and we had to review it on-air.
We were joined by Luke Bassett, a former senior advisor for domestic climate policy at the U.S. Treasury Department and a former senior staff member at the Senate Committee on Energy and Natural Resources. We chatted about the major steps in the reconciliation process, what to watch next, and what to look for in the new GOP draft. Shift Key is hosted by Jesse Jenkins, a professor of energy systems engineering at Princeton University, and Robinson Meyer, Heatmap’s executive editor.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Jesse Jenkins: Let’s come back to this as a negotiation. This is the first salvo from the House. What does this tell you about where we go from here? Is this a floor? Could it get worse? Is it likely to get better as the lobbying kicks off in earnest by various industries threatened by these changes, and they try to peel things back? What do you think happens next?
Luke Bassett: If you run with the horror movie analogy here, this is scary. I think a lot of people, especially in any energy startups or folks who have been penciling out deals, to start really lining up new projects — or even folks looking for a new EV to buy are suddenly going to have to totally rethink what the next few years look like.
And, you know, whether or not they want to build a factory, buy a car, or have to switch from an electric heat pump to a whale oil burning stove. Who knows? That said, there are champions for each of these in very different ways in the Senate. There are lobbyists who —
Jenkins: — in the House, too.
Bassett: Exactly. There will be lobbyists weighing in. And I think it matters to really think through … I think we’ve been faced with gigantic uncertainty since January. And there’s a part where companies all across the energy sector are looking at this text as we speak and thinking, whoa, I didn’t sign up for this. And to combine this with tariffs, to combine it with the cuts to other federal programs in the other committees’ jurisdictions, it is just a nearly impossible outlook for building new projects. And I bet a bunch of people, CEOs and otherwise, are thinking, I wish Joe Manchin were back in the Senate. But you know, it is what it is.
Robinson Meyer: I will say that it could get worse from here because they will be negotiating with the House Freedom Caucus and with various other conservative House members. And they’ll also be negotiating against the president’s wishes, which is that this move and get done as soon as possible. And so when I talked to Senator John Curtis, Republican of Utah, who’s a supporter of the IRA, or wants to see it extended in large part, and I asked him questions like, what happens if Republicans really go to work in the House on the IRA and then it gets sent to the Senate? One dynamic we’ve already seen during this Congress is that te House Republican Caucus in this Congress is unusually functional and unusually strategic, and has been unusually good at passing relatively extreme and aggressive policy and then jamming the Senate with it.
And unlike what has happened in the past, which is the House Republican Caucus can’t really do anything, so the Senate passes a far more moderate policy, sends it to the House and dares the House to shut things down. This time the House, if folks remember back in March, the House passed a fairly aggressive budget and kicked it to the Senate and then dared the Senate to shut down the government, and ultimately the Senate decided to keep the government open.
I asked Curtis what happens if they do the same with the IRA. What happens if they really go to task on the IRA? They pass fairly aggressive cuts to it and they send it to the Senate. And his answer was, well, I don’t think the House is going to do that. I don’t think a bill that really savages the IRA could pass the House.
We’ll see, but I just don’t think there’s any floor here. I think there’s no floor for how bad this gets. And I think I just don’t, you know … Before we went into the administration, there was a lot of confidence that the Trump administration and the new Republican majority and the Congress was not going to do anything to substantially make the business environment worse. We’ve discovered there does seem to be a degree of tariffs that will make them squeal and pull back, but we actually haven’t found that in legislature yet.
Music for Shift Key is by Adam Kromelow.