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Which institutional purchaser of qualifying carbon credits will come out on top?
The Department of Energy wants YOU to purchase carbon removal. Well, maybe not you, personally, but your city, state, or employer. And as an incentive, it’s turning the buying process into the equivalent of an arcade game, inviting companies to try to make it to the top of a new carbon removal buyers leaderboard.
The agency soft-launched the concept on Thursday under the banner of the “Voluntary Carbon Dioxide Removal Purchase Challenge.” There’s no prize money associated with the challenge — it’s not even clear whether there will be any winners. The goal is to encourage companies to make “bigger and bolder” public commitments to purchase carbon removal. At least one company, Google, has already said it would commit $35 million this year.
As the world has delayed climate action, developing the capacity to remove carbon from the atmosphere has become an imperative. Scientists now suggest it is “unavoidable” if we want to limit warming to internationally agreed-upon levels. Carbon removal offers both a way to cancel out emissions from activities like flying and growing food that could take decades to figure out how to eliminate, and an antidote for some of the legacy carbon that’s already been emitted.
But today, existing carbon removal methods and technologies are too small-scale and expensive to make a meaningful difference. Many also lack adequate techniques to measure and verify how effective they are. That’s why last year the Department of Energy announced that it would spend $35 million to purchase carbon removal from promising companies. The initial winners are expected to be announced later this year.
With that program, the DOE was following in the footsteps of companies like Stripe and Microsoft, both of which have put significant resources toward vetting carbon removal startups and making early purchases of credits to help get the industry off the ground. With this new challenge, the agency said it aims to address non-financial barriers that are preventing companies from buying carbon removal as part of their climate strategies, such as a lack of transparency and a “lack of recognition that carbon removal credit purchases are essential and valuable today.”
To join the challenge, a company or organization will be required to purchase carbon removal credits “annually” and disclose the details to the DOE. The agency will build a public inventory of carbon removal credit buyers, suppliers, projects, standards and methodologies used, and volume of carbon removal delivered.
Companies have no apparent incentive to participate other than to see their names on the list, and possibly try and get to the top. In the words of DOE, it offers a “a unique opportunity to enter the carbon removal market with a splash!” (Exclamation point added by me.)
There is already a voluntary leaderboard tracking carbon removal purchases and deliveries called CDR.FYI. But not just anyone will be able to get on the DOE’s list. To qualify, the purchases must also be “aligned with the requirements and assessment criteria of DOE’s purchases.” The agency also said it would evaluate additional carbon removal projects beyond those it has assessed for its purchase pilot, and publish a list of available credits that have garnered a government stamp of approval.
Sasha Stashwick, the policy director at Carbon180, a carbon removal advocacy nonprofit, told me this is a promising step to building a carbon removal market that doesn’t suffer from the integrity issues that have plagued the voluntary carbon offsets markets.
“I think one of the key non market barriers is, how do you even define what is a reputable ton of carbon removal? Alleviating that burden is potentially huge,” she said. “The federal government is basically saying, we’ll de-risk these projects for you. We’ll determine what is a good project, and you can buy alongside us.”
The rules are preliminary, and the agency is accepting comments on the program until May 15. It expects to launch the challenge later this year.
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Add it to the evidence that China’s greenhouse gas emissions may be peaking, if they haven’t already.
Exactly where China is in its energy transition remains somewhat fuzzy. Has the world’s largest emitter of greenhouse gases already hit peak emissions? Will it in 2025? That remains to be seen. But its import data for this year suggests an economy that’s in a rapid transition.
According to government trade data, in the first fourth months of this year, China imported $12.1 billion of coal, $100.4 billion of crude oil, and $18 billion of natural gas. In terms of value, that’s a 27% year over year decline in coal, a 8.5% decline in oil, and a 15.7% decline in natural gas. In terms of volume, it was a 5.3% decline, a slight 0.5% increase, and a 9.2% decline, respectively.
“Fossil fuel demand still trends down,” Lauri Myllyvirta, the co-founder of the Centre for Research on Energy and Clean Air, wrote on X in response to the news.
Morgan Stanley analysts predicted Friday in a note to clients that this “weak downstream demand” for coal in China would “continue to hinder coal import volume.”
Another piece of China’s emissions and coal usage puzzle came from Indonesia, which is a major coal exporter. Citing data from trade data service Kpler, Reuters reported Friday that Indonesia’s thermal coal exports “have dropped to their lowest in three years” thanks to “weak demand in China and India,” the world’s two biggest coal importers. Indonesia’s thermal coal exports dropped 12% annually to 150 million tons in the first third of the year, Reuters reported.
China’s official goal is to hit peak emissions by 2030 and reach “carbon neutrality” by 2060. The country’s electricity grid is largely fueled by coal (with hydropower coming in at number two), as is its prolific production of steel and cement, which is energy and, specifically, coal-intensive. For a few years in the 2010s, more cement was poured in China than in the whole 20th century in the United States. China also accounts for about half of the world’s steel production.
At the same time, China’s electricity demand growth is being largely met by renewables, implying that China can expand its economy without its economy-wide, annual emissions going up. This is in part due to a massive deployment of renewables. In 2023, China installed enough non-carbon-emitting electricity generation to meet the total electricity demand of all of France.
China’s productive capacity has shifted in a way that’s less carbon intensive, experts on the Chinese energy system and economy have told Heatmap. The economy isshifting more toward manufacturing and away from the steel-and-cement intensive breakneck urbanization of the past few decades, thanks to a dramatically slowing homebuilding sector.
Chinese urban residential construction was using almost 300 million tons of steel per year at its peak in 2019, according to research by the Reserve Bank of Australia, about a third of the country’s total steel usage. (Steel consumption for residential construction would fall by about half by 2023.) By contrast, the whole United States economy consumes less than 100 million tons of steel per year.
To the extent the overall Chinese economy slows down due to the trade war with the United States, coal usage — and thus greenhouse gas emissions — would slow as well. Although that hasn’t happened yet — China also released export data on Friday that showed sustained growth, in spite of the tariff barriers thrown up by the Trump administration.
The nonprofit laid off 36 employees, or 28% of its headcount.
The Trump administration’s funding freeze has hit the leading electrification nonprofit Rewiring America, which announced Thursday that it will be cutting its workforce by 28%, or 36 employees. In a letter to the team, the organization’s cofounder and CEO Ari Matusiak placed the blame squarely on the Trump administration’s attempts to claw back billions in funding allocated through the Greenhouse Gas Reduction Fund.
“The volatility we face is not something we created: it is being directed at us,” Matusiak wrote in his public letter to employees. Along with a group of four other housing, climate, and community organizations, collectively known as Power Forward Communities, Rewiring America was the recipient of a $2 billion GGRF grant last April to help decarbonize American homes.
Now, the future of that funding is being held up in court. GGRF funds have been frozen since mid-February as Lee Zeldin’s Environmental Protection Agency has tried to rescind $20 billion of the program’s $27 billion total funding, an effort that a federal judge blocked in March. While that judge, Tanya S. Chutkan, called the EPA’s actions “arbitrary and capricious,” for now the money remains locked up in a Citibank account. This has wreaked havoc on organizations such as Rewiring America, which structured projects and staffing decisions around the grants.
“Since February, we have been unable to access our competitively and lawfully awarded grant dollars,” Matusiak wrote in a LinkedIn post on Thursday. “We have been the subject of baseless and defamatory attacks. We are facing purposeful volatility designed to prevent us from fulfilling our obligations and from delivering lower energy costs and cheaper electricity to millions of American households across the country.”
Matusiak wrote that while “Rewiring America is not going anywhere,” the organization is planning to address said volatility by tightening its focus on working with states to lower electricity costs, building a digital marketplace for households to access electric upgrades, and courting investment from third parties such as hyperscale cloud service providers, utilities, and manufacturers. Matusiak also said Rewiring America will be restructured “into a tighter formation,” such that it can continue to operate even if the GGRF funding never comes through.
Power Forward Communities is also continuing to fight for its money in court. Right there with it are the Climate United Fund and the Coalition for Green Capital, which were awarded nearly $7 billion and $5 billion, respectively, through the GGRF.
What specific teams within Rewiring America are being hit by these layoffs isn’t yet clear, though presumably everyone let go has already been notified. As the announcement went live Thursday afternoon, it stated that employees “will receive an email within the next few minutes informing you of whether your role has been impacted.”
“These are volatile and challenging times,” Matusiak wrote on LinkedIn. “It remains on all of us to create a better world we can all share. More so than ever.”
The company managed to put a positive spin on tariffs.
The residential solar company Sunrun is, like much of the rest of the clean energy business, getting hit by tariffs. The company told investors in its first quarter earnings report Tuesday that about half its supply of solar modules comes from overseas, and thus is subject to import taxes. It’s trying to secure more modules domestically “as availability increases,” Sunrun said, but “costs are higher and availability limited near-term.”
“We do not directly import any solar equipment from China, although producers in China are important for various upstream components used by our suppliers,” Sunrun chief executive Mary Powell said on the call, indicating that having an entirely-China-free supply chain is likely impossible in the renewable energy industry.
Hardware makes up about a third of the company’s costs, according to Powell. “This cost will increase from tariffs,” she said, although some advance purchasing done before the end of last year will help mitigate that. All told, tariffs could lower the company’s cash generation by $100 million to $200 million, chief financial officer Danny Abajian said.
But — and here’s where things get interesting — the company also offered a positive spin on tariffs.
In a slide presentation to investors, the company said that “sustained, severe tariffs may drive the country to a recession.” Sounds bad, right?
But no, not for Sunrun. A recession could mean “lower long term interest rates,” which, since the company relies heavily on securitizing solar leases and benefits from lower interest rates, could round in the company’s favor.
In its annual report released in February, the company mentioned that “higher rates increase our cost of capital and decrease the amount of capital available to us to finance the deployment of new solar energy systems.” On Wednesday, the company estimated that a 10% tariff, which is the baseline rate in the Trump “Liberation Day” tariffs, could be offset with a half percentage point decline in the company’s cost of capital, although it didn’t provide any further details behind the calculation.
Even in the absence of interest rate relief, a recession could still be okay for Sunrun.
“Historically, recessions have driven more demand for our products,” the company said in its presentation, arguing that because their solar systems offer savings compared to utility rates, they become more attractive when households get more money conscious.
Sunrun shares are up almost 10% today, as the company showed more growth than expected.
For what it’s worth, the much-ballyhooed decline in long-term interest rates as a result of Trump’s tariffs hasn’t actually happened, at least not yet. The Federal Reserve on Wednesday decided to keep the federal funds rate at 4.5%, the third time in a row the board of governors have chosen to maintain the status quo. The yield on 10-year treasuries, often used as a benchmark for interest rates, is up slightly since “Liberation Day” on April 2 and sits today at 4.34%, compared to 4.19% before Trump’s tariffs announcements.