Alaska is one of the oldest oil-producing regions in the United States. The public was recently reminded when the Biden administration approved a large new oil project in the state.
At the same time, Alaska, like other states, is eager to participate in the transition to lower carbon forms of energy. More specifically, Alaska wants a piece of the carbon offset action.
This week, Gov. Mike Dunleavy is convening a conference on sustainable energy where the topic will be discussed, as well as Alaska’s path to making the most of its carbon offset resources.
The legislative part of the matter was settled with a new bill that Dunleavy signed into law earlier this week, and now the time for the real work seems to have come.
“This bill will now allow us to have conversations around the world with people involved in the carbon market. Just like oil, gas, lumber, this is a commodity that can be monetized now,” Dunleavy said in the signature. of the bill, as aforementioned by PA.
According to supporters of the bill, it would allow Alaska to have the best of both worlds: oil production and carbon offset sales. The plan’s chances of success are uncertain, critics say, because it’s unclear if anyone would be interested in buying Alaskan carbon offsets. Related: European natural gas prices fall to lowest level since 2021
“There’s kind of a quality-of-dreams camp on this issue. ‘If you plant the trees and create credit, will someone buy them?'” said one such critic, a scholar of environmental and climate policy, Barry Rabe, to the PA.
“What is not clear is what that market would look like and whether or not buyers will find an attractive investment. That is the leap of faith,” Rabe said.
Indeed, the carbon offset market is one of growth. shell recently projected that the voluntary purchase of carbon offsets could increase fivefold by 2030, with transaction volumes reaching the level of 2019 air travel emissions.
In 2021, that market was worth about $2 billion, but is expected to grow to between $10 billion and $40 billion by 2030. The volume of carbon dioxide involved in these transactions will increase from 500 million tons currently to up to 1.5 billion. tons, also said the supermajor, which co-authored the report with Boston Consulting Group.
In that sense, then, Alaska’s foray into carbon offsets might not be much of a leap of faith. In fact, nature can be seen as a commodity on a par with oil, coal and gas, and monetized like them.
As for how lucrative this market could be, look no further than Zimbabwe, where the government just this month saying it would take 50% of all revenue generated by carbon offset projects in the country. Another 30% will go to foreign investors and 20% will be reserved for local communities.
“We are determined to make sure that climate finance, intended to empower the country, reaches those who deserve it most. We do not want instances of climate laundering,” Zimbabwe’s Environment and Climate Minister Mangaliso Ndlovu said. quoted by Reuters.
A carbon offset market would also help improve Alaska’s reputation, according to some, including Republican state Sen. Shelley Hughes. While initially skeptical of the idea, Hughes has supported it as a means to attract further investment.
“I think that in order to get capital investment into our state, we are going to have to be perceived in a way that is trying to overcome all of this,” said Senator Hughes, quoted by AP.
If the idea works, it will work like this: The state of Alaska will sell carbon offset credits to companies that want to reduce their carbon footprint. The compensation will go to projects such as the protection and improvement of forests. A fifth of the proceeds from these sales would go to a fund for the development of low carbon energy.
There’s no reason the idea shouldn’t work, skepticism notwithstanding. With the IRA and increasingly strict emission regulations, many companies will be interested in buying carbon offsets for lack of other means to reduce their carbon footprints.
The Alaska Department of Natural Resources has already identified three forests that are suitable for use as carbon sequestration sites. State officials have also considered allowing third parties to establish carbon offset projects on Alaskan land as an additional source of revenue.
“It seems very plausible to me that Alaska could make money from a forest carbon offset program,” Freya Chay of the Carbon Plan, a carbon offset nonprofit. said Alaska Public Media. “The real question for me is what does that program actually accomplish? And what are the costs not to the Alaska budget, but to the larger systems we care about?”
The genuine nature of carbon sequestration projects funded by carbon offset sales is a considerable concern in that space, but not the most important.
The biggest problem for Alaska may be the increasing competition in the carbon offset market, as many see the lucrative opportunities offered by this emerging but extremely promising market.
By Charles Kennedy for Oilprice.com
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