Biochar: burnt offerings?

Biochar is a miraculous material, improving soils, enhancing agricultural yields and avoiding 1.4kg of net CO2 emissions per kg of waste biomass (that would otherwise have decomposed). IRRs surpass 20% without CO2 prices or policy support. Hence this 18-page note outlines the opportunity, leading companies and a disruption of biofuels?


Biochar is presented as a miracle material by its proponents, improving water and nutrient retention in soils by 20% and crop yields by at least 10%. We review technical papers in support of biochar on pages 2-3.

Bio-char pricing varies broadly today, however we argue bio-char can earn its keep at a price in the thousands of dollars per ton, based on its agricultural benefits (pages 4-5).

The production process is described in detail on pages 6-8, reviewing different reactor designs, their resultant product mixes, their benefits and their drawbacks.

Economics are laid out on pages 9-10, outlining how IRRs will most likely surpass 20%, on our numbers. Sensitivity analysis shows upside and downside risks.

Carbon credentials are debated on pages 11-12, using detailed carbon accounting principles. Converting each kg of dry biomass into biochar avoids 1.4kg of CO2 emissions.

We are de-risking over 2GTpa of CO2 sequestration, as the biochar market scales up by 2050. There is upside to 6GTpa, if fully de-risked, as discussed on pages 13-14.

Biofuels would be disrupted? We find much greater CO2 abatement is achieved converting biomass into biochar than converting biomass into biofuels. Hence pages 15-16 discuss an emerging competition for feedstocks.

Leading companies are profiled on pages 17-18, including names that stood our for our screening work.

Carbon accounting: philosophical investigations?

This short essay argues current carbon accounting frameworks may not be entirely helpful. Metrics like “Scope 1”, “Scope 2” and “Scope 3” only make sense for a small subset of companies, but they lack applicability, comparability, completeness, and reliability across the broad landscape of global emissions. We prefer granular carbon accounting which can be compared to counterfactuals. Our argument is illustrated with examples; and based on the philosophy of language, from Wittgenstein through to the present day.


Philosophy of language: an overview?

Many moons ago, I was awarded a degree in Philosophy and Neuroscience at the University of Oxford. It turns out that the philosophy of language is surprisingly helpful for carbon accounting, as explored in this short research note…

At the turn of the twentieth century came the logical positivists. They sought to codify language into symbols and logical operations. For example, to say that “my car emits CO2” can be analyzed as a proposition (P), and broken down into the words “my car” which specially references a particular hunk of metal sitting in the driveway, the property of “emitting” (which in this case applies to the car) and a type or class called “CO2” which represents all molecules with the chemical structure O=C=O. My car runs on gasoline and so P is true. All language, and all of the problems of philosophy, the logical positivists claimed, could be analyzed as logical statements like this, which will be true or false depending on the state of affairs in the world. Some went so far as to claim that these kinds of logical statements were all there was to language. 

Then came Wittgenstein (1889-1951), still to my mind the greatest philosopher of all time, who shattered logical positivism, and philosophy more broadly. To Wittgenstein, the strict rules proposed by logical positivists have nothing to do with how language is actually spoken and understood by people in the real world. Language is no more than an imprecise set of customs. These customs work because users of the language are generally like-minded, and tend to interpret utterances in similar ways. In a few circumscribed cases, utterances in a language might have a logical structure like “my car emits CO2”. But language is complex, and many other meaningful utterances totally defy this framework, like answering a question with a thumbs up. Other utterances in language appear to make sense, such as “if it’s 6am in New York, what time is it on the sun?”. But on closer inspection, all that is shown by these kinds of philosophical problems is the boundaries of our linguistic customs. No philosophical questions have proper answers.

Then came modern philosophy, reeling, and trying to justify its existence in the aftermath of Wittgenstein. Yes, many questions of philosophy are at risk of being unanswerable. But philosophy can nevertheless provide some useful ways of thinking about things. One of my favorite  writers was David Lewis (1941-2001), famous for “possible world semantics”, where language can be analyzed by considering the world around us, but also other hypothetical worlds. “If I switch my car to an EV, my CO2 emissions will fall” means that in the vast majority of possible worlds where I switch my car to an EV, my CO2 emissions fall. Then we can start considering what these possible worlds look like (including worlds where I am charging my EV from the grid, or from a diesel generator, or even the broader range of possible worlds where I sell my car altogether and take public transport). 

If you have made it this far, thank you for not giving up already. We argue below that traditional carbon accounting frameworks are like logical positivism. They are subject to holes and philosophical muddlings that could bring Wittgenstein back from the grave. But useful carbon accounting can be salvaged, especially via a “possible worlds” approach.

CO2 accounting frameworks: logical positivism revived?

The logical positivism of the CO2 accounting world is the Greenhouse Gas Protocol. It starts with Scope 1 emissions, which covers all of the CO2 emitted directly by a company, such as the fuel combusted at company facilities. It then adds Scope 2 emissions, which cover the CO2 embedded in the heat and electricity purchased by the company. Finally, it adds Scope 3 emissions, which covers all the CO2 indirectly emitted through the use of the company’s products.

CO2 accountants, like logical positivists before them, invariably seem to believe that all of the challenges of CO2 accounting can be solved by strong-arming companies into hiring CO2 accountants; moreover that climate progress can best be achieved in the form of corporate promises to reduce these emissions categories; and most brazenly, that CO2 accounting simply comes down to Scope 1, Scope 2 and Scope 3.

That’s not how companies work, any more than logical positivism is how language works. It is tempting to conceptualize ExxonMobil as a single giant furnace in Texas, and then ask the company why it can’t simply tell us how much CO2 is being emitted out of its furnace. But the reality is a Super-Major with a presence in over 200 countries globally, and many activities in each country. In many of these, it is not the owner or operator of assets, but a minority shareholder, in a joint venture operated by a third-party (which may or may not even relay the requisite data back to other JV partners). In many others, it does not do its own drilling, construction or maintenance, but hires third-party contractors (e.g, oil service companies).

That’s not how financial accounting works either. Back when I was a sell-side analyst, I remember downgrading another Oil Major to a ‘Sell’ because I discovered they had over $15bn of debt “off their balance sheet”, hidden away from their gearing calculations. As the company correctly pointed out, IFRS accounting rules do not require them to consolidate the debt in these entities, as they are minority shareholders. Only their share of income must be consolidated. Obviously, the financials of contractors and service providers are not consolidated either. And so it is with CO2 disclosures that are published by companies today. These disclosures are usually limited to consolidated assets, or even more narrowly, to consolidated AND operated assets.

Limiting CO2 disclosures to a subset of assets, however, limits the comparability of these disclosures. Companies with concentrated portfolios (few assets, large controlling stakes, operations performed in-house) will appear to have more CO2 emissions than otherwise identical companies with sparse portfolios (many assets, non-controlling stakes, operations performed by contractors).

Scope 1 & 2 emissions can also be “gamed” by giving up control of an asset, such as selling a corporate headquarters then leasing it back (it is no longer “our asset”); or by outsourcing activities that used to be performed in house (it is no longer “our maintenance crew”).

Some industries also defy measurement via the Scope 1, 2 and  3 framework. Also back when I was a sell-side analyst, I would be sent on punishing ‘marketing trips’, where over the course of ten days, I would participate in 70 meetings, in 10 different cities, going Coast to Coast in the United States. (By the end, you didn’t know which way was up or down!). But I once tried adding up the CO2 emissions from one of these trips. The calculations became pretty hairy. I would be trying to figure out what model plane or taxi I was travelling on, how to allocate its emissions between myself and my co-passengers, and whether to adjust for nuances such as business class seating. I think these are genuine challenge for carbon accounting, and they were part of my CO2 footprint as an analyst. Whereas the Greenhouse Gas Protocols effectively ignore them. Under their frameworks, these are simply the Scope 1 emissions of transportation companies, from airlines (who report them) to individual Uber drivers (who do not).

As a general rule, the smaller the entity, the less likely they will have the resources to calculate their Scope 1, 2 and 3 emissions. (I may calculate a look-through of all our CO2 emissions on behalf of the West household, but I suspect I am somewhat unusual!). Are we thereby saying that only big corporations need to reduce their emissions, while smaller corporations, and the 8bn people in the world are somehow exempted?

Scope 3 emissions can be a totally meaningless concept. Imagine you are that airline or Uber driver, trying to quantify how your service has indirectly contributed to a customer’s CO2 footprint? You have delivered me to my destination. How are you supposed to know if I am in town to discuss energy stocks in an office building (low carbon) or set fire to the local library (high carbon). If the latter were the case, then the law would not hold you responsible, but the carbon accountants might! For a more real example, consider the Tesla photographed below, towing a diesel generator, which if used to charge the Tesla would result in 30% higher emissions per mile than simply driving an ICE car (data here).

Scope 2 emissions can also be meaningless and hard to measure. For example, renewable energy credits are legal contracts where all parties agree to pretend that gas and coal electrons are wind and solar electrons and vice versa. As per our recent research, these RECs can create some very strange implications for carbon accounting (below).

Scope 1 emissions are also debatable, for example, where Scope 1 emissions sources are only inferred, not measured directly. For example, we estimate that 2% of all methane is leaked across the entire global value chain, from producer to consumer, but if a company genuinely knew whenever it was unintentionally leaking methane, it would be a lot easier to fix the leaks (note below, including some interesting new technologies to help).

Other important emissions categories are not captured at all in this framework. For example, our research also shows that almost two-thirds of CO2 emissions are embodied in materials and products (data below), not in purchased fuel and electricity. But the emissions associated with purchasing raw materials do not appear to be captured by Scope 1, 2 or 3 categories.

The destruction of nature, or CO2 fluxes caused by deforestation or environmental degradation do not seem to be captured either. Nor is there an elegant solution in these carbon accounting frameworks to capture the positive impacts from nature-based solutions that are sponsored by companies (do they offset Scope 1, 2 or 3, or go in their own separate bucket?).

Most pressingly, from our own CO2-accounting models, it is not even particularly helpful to know the absolute number of Scope 1 or 2 emissions, unless you have a “per unit” metric, on which to compare different companies. In some industries, these “units” are inherently apples and oranges (e.g., how do you compare the CO2 per iPhone to the CO2 per hamburger to determine whether Apple is a more sustainable company than McDonalds).

Even when competitors in an industry are producing highly similar products, care is warranted. We have seen this, for example, in our screen of refiners below. Some of the apparent laggards are simply producing cleaner fuels (e.g., to meet California fuel standards), or they are also co-producing petrochemicals, a fundamentally different product. Hence our analysis has been very careful to adjust for these effects, before declaring true “leaders and laggards”.

Is carbon accounting a useless endeavor: homage to Wittgenstein?

To re-iterate, carbon account frameworks seem to make sense, in a very circumscribed set of contexts, especially where a company operates a single, large asset, like a blast furnace, and we can measure the Scope 1, 2 and 3 emissions of this operation. This is a little bit reminiscent of how logical positivism seems to make sense, in a very circumscribed set of contexts, such as very simple propositions in a language.

There are also many examples of companies that seem to defy meaningful measurement via Scope 1, 2 and 3; categories of emissions that are altogether missed; reductions in Scope 1&2 emissions that do not actually have any bearing on CO2 emissions; and on closer inspection, the concepts of Scope 1, 2 and 3 are a little bit fuzzy.

To say that Scope 1, 2 and 3 emissions conceptually capture everything that needs to be captured in carbon accounting is like saying that all of language boils down to logical operations. This might all make carbon accounting questions seem unanswerable.

Our own approach to carbon accounting: homage to Lewis?

Carbon accounting is not useless. It simply needs to be done right. And this involves a mixture of data-crunching and philosophy. Below are a dozen principles we have found helpful, illustrated with examples, where possible. Our conclusion is that companies that want to promote climate progress should publish granular, asset-level emissions data, and strive to reduce these emissions of these underlying processes; rather than focusing on headline data at the corporate level.

(1) Companies do not emit CO2, processes do. To re-iterate, ExxonMobil is not a single giant furnace in the center of Texas.  It is a company that owns interests in various assets. Each asset uses various processes to make various products. It is these processes that cause CO2-equivalent fluxes and need to be decarbonized in the most cost-effective way, regardless of whether the process is undertaken in-house or by a contractor. The same goes for any company. Carbon accounting would be vastly better if numbers were published at the asset- or process-level, not the company level.

(2) CO2-equivalent fluxes should be the primary unit of account, not just emissions. Climate change is caused by the accumulation of greenhouse gases in the atmosphere.  Hence accounting for climate impacts should ideally capture the motion of all greenhouse gases into, and out of, the atmosphere (model below). These fluxes should all be converted into the common currency of CO2-equivalents (1 ton of methane is equivalent to 25 tons of CO2 and 1 ton of NOx is 298 tons of CO2).

(3) Processes can be combined like building blocks. For example, the total CO2 intensity of a gallon of gasoline can be calculated from the CO2 intensity of development, production, transport, refining and marketing (data below). The CO2 intensity of a mile of vehicle travel can then be calculated from the CO2 intensity of a gallon of gasoline, plus the process of manufacturing the vehicle and the process of ultimately scrapping the car. This allows our build-ups to assess entire value chains, and not just the companies in specific portions of the value chain.

(4) CO2 considerations are usually relative. It is tempting to dichotomize the world into “carbon emitting” and “non-carbon emitting” categories. The reality is a spectrum (below).

(5) Relativity requires a baseline. I like to think about the counterfactual to a process as the closest possible world(s) in which that process does not occur. I.e., the world(s) that are as similar as possible to the actual world, but with the one process in question changing. For a simple example, when we talk about the CO2 emissions of driving a mile, we usually mean relative to the counterfactual of not driving that mile. When we talk about the CO2 of Factory A’s product, the counterfactual might be factory B’s product. No process on Planet Earth occurs in a vacuum.

(6) Counterfactuals matter. All of this discussion of counterfactuals might seem academic Here is an example for why they matter. Planting a biofuel crop has a totally different CO2 flux if the alternatives are (a) leaving that agricultural land fallow (b) tearing down a rainforest. Where these counterfactuals get really useful, is in considering the relative CO2 fluxes that can be achieved with 1MWH of renewables (displacing coal power is best, conversion to hydrogen is materially worse) or 1kg of waste biomass (deep burial or biochar are superior to biofuels).

(7) Some processes are lower-carbon. Specifically, this means that the process results in a smaller flux of CO2 into the atmosphere, relative to the closest possible worlds in which the process is not undertaken. As an example, green plastics are generally lower-carbon than fossil plastic, (but still materially higher-carbon than not using plastic at all).

(8) Some processes are carbon-negative. Specifically, this means that the process results in a net flux of CO2 out of the atmosphere, into some other sink, relative to the closest possible worlds in which the process is not undertaken. For example, an acre of seaweed cultivation project results in 2 net tons of CO2-equivalent being sequestered in the deep ocean, relative to the alternative of not undertaking the seaweed cultivation project (note below).

(9) Some processes are carbon-neutral. Specifically, this means that the process results in zero net flux of CO2 into or out of the atmosphere, relative to the closest possible worlds where the process is not undertaken. This definition matters, because honestly, we see many projects claiming to be “carbon neutral” which are nowhere close on our numbers.

(10) If in doubt, build a ledger.  The best way I have found to calculate these carbon fluxes is to put two columns side-by-side in a spreadsheet, one reflecting the process, the other reflecting the counterfactual, and then go line-by-line, sub-process-by-sub-process. For a recent example, please see our data-file into biochar below.

(11) Counterfactuals will sometimes be debatable, but these are good debates to be having. By definition, a counterfactual is a fiction, a scenario that has not happened. Sometimes it is appropriate to consider a range of counterfactuals rather than a single counterfactual.  

(12) Accounting for nature-based solutions is no more complicated than accounting for any other process.  Some commentators criticize that carbon accounting is much more complicated for nature-based solutions. In our experience, it is no more complicated than the carbon accounting for any other carbon-reduction technology.

Please treat TSE data-files as building blocks. We now have over 500 research notes, data-files and models on our website. We have around 35 separate CO2 screens linked here. Often, doing the CO2 accounting for a large project is a function of combining the data from many of these pre-existing data-files. If we can help you with CO2-accounting please let us know.

Conclusions: what should companies do?

If companies want to help decision-makers understand their CO2 intensities, in our view, they should go a long way beyond blanket, company-level disclosures of Scope-1, and Scope-2 emissions. Instead, give us the underlying data: i.e., an asset-by-asset list of each facility, its output, its combustion emissions, methane emissions, electricity purchases, estimated CO2 intensity per unit of electricity, and other relevant data. This would make for vastly more meaningful comparisons.

Wooden wind turbines?

Carbon-negative construction materials derived from wood could be used to deflate the levelized costs of a wind turbine by 2.5 – 10%, while sequestering around 175 tons of CO2-equivalents per turbine. The opportunity is being progressed by Modvion and Vestas, as discussed in this short note below.


Introduction: the quest for lower-cost and lower-carbon wind?

Our roadmap towards net zero requires global wind and solar additions to treble from 160GW per year towards 500GW per year by mid-decade, so that renewables can reach 40-50% ultimate shares of power grids. The vast build-out makes it important to lower the costs and CO2 intensity of constructing renewable assets.

For onshore wind turbines, our model below captures these costs in detail. Our base case is a 6.75c/kWh levelized cost, for a farm of 100 x 3MW turbines costing $1,850/kW. Costs in the model are sub-divided into 30 distinct categories. A 10% reduction in capex confers a 10% reduction in levelized cost of electricity, all else equal.

The tower supporting the blades and nacelle explains c$300/kW of the cost, of which $60/kW is the cost of steel and the remainder is largely in fabrication, transport and installation. Moreover, producing 300 tons of steel likely has a CO2 footprint of 450T (data here). Supporting this heavy structure also requires around 1,300 tons of concrete, explaining another 150T of CO2 (data here).

Overall, we estimate that the embedded CO2 in a wind turbine gives its power generation a CO2 intensity of 0.02kg/kWh (data here). This is low by comparison to the 0.4kg/kWh CO2 intensity of today’s US power grid. Low CO2 intensity of the grid matters in itself, and for electric vehicles which will ultimately be charged from the grid (below).

There are also logistical challenges, which preclude the scaling-up towards larger and more cost-effective wind turbines. A conventional steel tower of 100+ meters will have a 4.5m diameter at its base, which is a size limit for road transportation in the US and Europe. 

Build the towers out of wooden not steel?

An alternative to lower both the costs and CO2 intensity of wind turbines is to use carbon-negative construction materials, such as glulam or cross-laminated timber. We are excited by this opportunity, featured in our recent research note (below), yielding 20-30% IRRs turning sustainably sourced forest products into alternatives for steel and cement, which together comprise 10% of global CO2.

To re-iterate, if mature forests are sustainably harvested, then it is ‘carbon negative’ to lock up their wood in construction materials, then re-plant younger and faster growing forests (chart below).

Modvion is a private company, based in Gothenburg, Sweden, founded in 2015 and with c20 employees. It is aiming to build wind turbines’ towers out of glulam, a material that is stronger than an equivalent weight of steel.

Three patents have been granted, for a fibre composite section (2018), a laminated wood tower and method for assembly (2020) and a wood connection used in a laminated wood tower (2020). An objective in the patents is to improve the strength and inter-connections between modular wooden tower components (below).

Advantages. Because the material is stronger and lighter, it could enable taller and more powerful turbines. Modvion cites that its technology “enables significantly decreased cost… [and] increased cost efficiency in the harvesting of wind turbines”. CO2 emissions in the construction of a wind turbine can be reduced by at least 25%.

Progress. A 30-meter prototype has already been built in Sweden, at Moelven’s glulam factory in Töreboda. Funding included a SEK69 ($8M) investment from the European Innovation Council in June-2020, as one of 72 companies that were granted funding, out of 3,700 applicants. The grant is being used to build a development facility for the first >100m towers. Preliminary contracts are in place to built a 110m tower for Varberg Energi and 10 x 150m towers for Rabbalshede Kraft. A collaboration agreement was also signed with Vattenfall in September-2020. In June-2020, Modvion stated “we are seeing enormous demand for our wooden wind turbine towers”. The first commercial structures could be built in 2022.

Vestas also invested in Modvion in February-2021 to accelerate the adoption of wooden wind turbine towers. Vestas launched a ventures fund in November-2020 to incubate disruptive technologies. This is a strong endorsement, as our patent analysis paints Vestas as the technology leader in onshore wind (below).

Elsewhere, Stora Enso, a large-cap materials company featured in our CLT screen (here) has supplied cross-laminated timber to Timber Tower GMBH, in order to construct the world’s first CLT wind tower, over 100m high, in Hannover, in 2012 (details here).

Disadvantages are that there is little established supply chain or prior experience with wooden towers. Some commentators may question their long-term durability.

Economic impacts: what cost savings?

70% materials cost savings? Ton-for-ton, cross-laminated timber and glulam is likely to cost 2x more than steel, at around $1,200/ton, in order to earn a 20% IRR building a CLT facility (mode below). However, the material is also lighter, and overall, we estimate that 85% fewer tons of CLT are required. This could cut the capex cost of a wind turbine by $40/kW, or around 2%.

Further savings are possible in fabrication and logistics, which are estimated to comprise $220/kW in our wind cost model. Ultimate savings here are less certain, but handling lighter modules might save 5-20%, which would be worth $11/kW, or 0.5-2.0% of total turbine costs.

Higher turbines could also be facilitated. As a rough rule-of-thumb, the power that can be harvested from the wind rises as a linear function of height (data below). Hence 5% taller turbines achieve 5% more power output, albeit incurring some higher costs in the process.

More details here: https://worldwide.espacenet.com/patent/search?q=Modvion

Conclusions: 2.5 – 10% cost deflation in carbon negative turbines?

If we add up all of the considerations above, we estimate there is potential to deflate the levellized costs of wind turbines by 2.5 – 10%, from 6.75c/kWh to 6 – 6.5c/kWh. The cost savings will be proportionately higher on challenging wind farms that have very high transport and logistics costs, but this is mainly a base effect. At the same time, around 175T of CO2-equivalents could be sequestered in each turbine.

Offshore offsets: nature based solutions in the ocean?

Nature based carbon offsets could migrate offshore in the 2020s, sequestering 3GTpa of CO2 for prices of $20-140/ton. In a more extreme case, if CO2 prices reached $400/ton, oceans could decarbonize the world. This 19-page note outlines the opportunity in seaweed and kelp cultivation. It naturally integrates with maritime industries, such as offshore wind, offshore oil and shipping. Over 95% of the 30MTpa seaweed market today is in Asia, but Western companies are emerging.


Nature based solutions to climate change can be improved by limiting their land use and shoring up their longevity. These considerations naturally suggest a role for oceans, which cover 70% of the planet and are a 45x larger carbon sink than the atmosphere (pages 2-5).

Seaweed and kelp’s characteristics, as nature-based solutions, are spelled out on pages 6-8, explaining how they are cultivated, their typical biomass absorption rates, and their typical CO2 sequestration mechanisms.

World-scale potential as a carbon sink is outlined on pages 9-10, including the possibility of decarbonizing the world.

Commercialization is under way, across 30MTpa of seaweed and kelp cultivation in Asia, and a dozen interesting companies in the West. We profile some of the companies that stood out on pages 11-13.

Economics can be attractive, $20-40/ton CO2 prices enhance IRRs and will help the opportunity to scale up. But $400/ton CO2 prices are needed for pure sequestration projects that do not yield any sellable biomass (pages 14-17).

Integration options with pre-existing maritime industries, as well as conclusions for the world’s route to net zero, are spelled out on pages 18-19.

One hundred years of carbon offsetting?

An acre of land can absorb 40-800 tons of CO2 over the course of a century. Today’s note ranks different options for CO2 sequestration over 100-year timeframes. Active management techniques and blue carbon eco-systems are most effective.


Nature based solutions to climate change are among the largest and lowest cost opportunities in the energy transition, with potential to absorb well over 20GTpa of CO2e for costs around $3-50/ton. We argue they will disrupt the entire new energies industry and will increasingly be adopted in the decarbonization strategies of climate-conscious organizations (research below).

One of the question marks over nature-based solutions is their impact over long time-frames. Another is the CO2 that can be offset per unit of land (note below)

Hence the purpose of this short research note is to quantify how much CO2 is most likely to be removed from the atmosphere and sequestered for different negative-emissions technologies, over the course of a century. Our answers are laid out below and we will run through the options in order.

Peatlands are most likely to absorb around 40 tons of CO2 emissions over the course of a century. This is the lowest volume shown in our chart, as an acre of peatland tends to absorb around 0.4T of CO2 per acre per year. Where peatland stands out, however, is that they continue accumulating CO2 at this rate for millennia. Hence an acre of peatland typically contains over 1,600 tons of CO2-equivalents, which is 4-8x more than a terrestrial forest and more than other blue carbon ecosystems (data below). This means that preserving pre-existing peat bogs is debatably more important than establishing new ones.

Restoring soil carbon in agriculture is next in our chart. It can absorb 75 tons of CO2 emissions over the course of a century. This number remains lower than other CO2-offsetting technologies. But it has the advantage of being compatible with crop-based agriculture and could therefore be implemented across a vast 4bn acres of croplands, where soil carbon has likely fallen from 4% in pre-industrial times to 1% today, due to mechanized agriculture, and explaining 20-30% of all anthropogenic CO2 emissions. We are seeing exciting evidence that CO2 markets could incentivize farmers to change their practices (note below).

Carbon capture and storage technologies, including direct air capture, are next on our list and are expected to sequester around 100 tons of CO2 per acre in our base case. In turn, this is derived from technical papers in our model below. However the range is broad, spanning from 5 tons to 1,000 tons of CO2 per acre, depending on reservoir quality. Injectivity is also expected to follow a decline curve, over a c50-year sequestration project. Total CCS or DAC costs will likely range from $70-200/ton, which is generally higher than nature based solutions.

Simple reforestation comes next, expected to sequester 200 tons of CO2 per acre over the course of a century. This has all been achieved after c40-years, as a typical forest’s growth follows a sigmoidal trajectory. After c40-years, the rate of trees’ growth has approximately halved (data below) while the rate of biomass decomposition will cancel out new carbon uptake. We note our numbers here are on the conservative side, as forest biomass is generally estimated between 200-400 tons of CO2e per acre in technical papers. To be clear, for reforestation projects to absorb CO2, you must start with an area that is not forested (e.g., sourced from the world’s 2.5bn hectares of degraded lands), re-forest them, then the forests must remain in tact.

Active forestry can almost double the net CO2 absorption from forests over a 100-year timeframe. Specifically, our recent research considers the opportunity turning forest products into carbon-negative construction materials, such as cross-laminated timber, locking up the carbon in the wood products for centuries (note below). Our numbers assume that one-third of the forest’s carbon is lost due to harvesting and in processing forest products. Then a new cycle of reforestation can begin immediately. This explains the “saw-tooth” profile for sustainable forestry in our chart above.

Most of the carbon-absorbing systems considered above tend to mature and slow down their rates of CO2 sequestration. But three further examples in our chart continue their rate of CO2 absorption almost unabated.

Seaweed aquaculture has been the focus in our recent research, underpinning a vast carbon sink, forming 20 tons of dry biomass per acre per year, of which c10% tends to detach and sink into the deep ocean, where it is thought to be effectively sequestered for millennia. Seaweed and kelp biomass turns over around 10 times per year. Hence the flywheel of ocean carbon sequestration keeps spinning indefinitely. Over a century, seaweeds should sequester around 230 tons of CO2 per acre of seaweed cultivation per year.

Mangrove forests may absorb 450 tons of CO2-equivalents over the course of a century, helped by two factors. First, they are fast growing plants, absorbing around 9 tons of CO2 per acre per year, compared with our base case of 5 tons of CO2 per acre per year for terrestrial forests. Second, they shed material into swamp-like blue carbon eco-systems that lie among their thick roots. Material continues accumulating in this eco-system, which actually turns shallow waters into swamps, then from swamps into land. Again our numbers may be conservative, as some technical papers estimate that mature mangrove forests contain around 1,000 tons of CO2e per acre. Mangrove restoration costs $3-130/ton, depending on the location and the hurdle rate (note below).

Biomass burial can likely sequester the most CO2 per acre of any option in our chart. This involves fast-growing crops, which absorb 10-20 tons of CO2 per acre per year, then harvesting this biomass, and burying it 10-meters underground, so that the carbon is effectively trapped. We estimate that two-thirds of the fixed CO2 could be buried, the buried material will decompose at a rate of c1% per annum, and with a $15-50/ton CO2 price the practice could sequester around 8x more CO2 than converting the crops into biofuels (note below).

Biochar? While adoption of this biomass burial practice is currently negligible, a similar feat can be accomplished via biochar. This is already a $1-2bn per year market, accelerating at 10-30% per annum. Instead of burying the biomass, it is pyrolysed into an inert material, which in turn can be scattered onto soils, as a one-off, or year after year.

Our conclusion is that vast amounts of carbon can be removed from the atmosphere, in natural ecosystems, over the course of the next century. Each acre of land can absorb 40-800 tons of CO2e. Active management techniques such as biomass burial and sustainable forestry are most effective, while blue carbon eco-systems can also yield rapid and sustained CO2 uptake. Please contact us for any questions on nature-based carbon offsets.

Renewable Energy Certificates?

Renewable Energy Certificates are legal contracts where all parties agree to pretend that gas and coal electrons are wind and solar electrons and vice versa. At best, these RECs incentivize incremental renewables projects to drive the energy transition. At worst, they may crowd out genuine decarbonization. At any rate, this note discusses some strange implications for energy analysts, as RECs have been commercialized over the past 20-years. Our view is that nature-based carbon credits may be superior to RECs.


Introduction: renewable energy credits in corporate decarbonization?

Increasing numbers of companies are embracing nature-based carbon offsets, as a part of their decarbonization strategies. We believe this will emerge as one of the largest and lowest cost opportunities to help the world reach ‘Net Zero’ CO2. Our data-file below, for example, quantifies the approaches of thirty leading companies.

But another strategy seen in companies’ decarbonization strategies has been to purchase “100% renewable energy”, especially for tech companies, where electricity dominates their CO2 emissions. At first glance, this is a strange claim to be making. Wind and solar only comprise c10% of the grid globally, c20% in Europe, and there are vast intermittency challenges in scaling wind and solar past 40-50% of any functioning system (see below).

Claims for 100% renewable electricity revolve around renewable energy certificates. These financial instruments also go by alternate names, such as ‘renewable energy credits’, ‘green tags’, ‘green energy certificates’, ‘tradable renewable certificates’, et al. But for the remainder of this article, we will abbreviate them as RECs.

Renewable Energy Credits (RECs) are the right to claim the environmental attributes of renewable electricity. They are traded in 1 MWH units. And they are sold by wind, solar, hydro and other green electricity producers.

An example for 100% renewable electricity.  Let us assume a small island grid generates 100MWH of electricity in a given year. 10MWH is generated by solar, and 90MWH is generated by diesel. Company X consumes 10MWH of energy from the grid, which statistically comprises 1MWH of solar and 9MWH of diesel. However, Company X then purchases 10MWH of renewable energy credits from the solar plant. In other words, Company X has purchased the legal rights to attribute all 10MWH of solar energy to its own operations, and thus claim that 100% of its electricity purchases are renewable.

Who benefits? The positive interpretation is that purchasing RECs supports renewables and will accelerate their deployment. Indeed, a $1-5/MWH (0.1-0.5c/kWh) premium for a typical wind or solar asset likely increases the base case IRR on a typical project by 0.1-1.5 pp (models below). At best, this may incentivize new renewable projects that otherwise would have been stranded.

Who suffers? The negative interpretation is that the CO2 intensity rises for everyone who does not purchase RECs. Let us assume I am a resident on the island discussed above. All 10MWH of renewable generation on the island has legally been claimed by Company X. The electricity I am buying, therefore is sourced from the remaining 90MWH generated by diesel. Bizarrely, even if I am drawing my electricity directly from the solar panels, I cannot claim to be using clean electricity. The attribution rights for that clean electricity have already been claimed by Company X and must not be double-counted.

Open to interpretation? The interpretation above is actually not ours, but that of the US Federal Trade Commission, i.e. the US’s foremost consumer protection agency. Its guidance document gives the following example: “A toy manufacturer places solar panels on the roof of its plant to generate power, and advertises that its plant is ‘‘100% solar-powered.’’ The manufacturer, however, sells renewable energy certificates based on the renewable attributes of all the power it generates. Even if the manufacturer uses the electricity generated by the solar panels, it has, by selling renewable energy certificates, transferred the right to characterize that electricity as renewable. The manufacturer’s claim is therefore deceptive. It also would be deceptive for this manufacturer to advertise that it ‘‘hosts’’ a renewable power facility because reasonable consumers likely interpret this claim to mean that the manufacturer uses renewable energy”.

Market metrics: how widespread and reliable are RECs?

How widespread? NREL tracks the REC market. It estimates that in 2019, 197,000 customers purchased 69TWH of unbundled RECs. For comparison, US wind and solar generation were around 400TWH in 2019. About 360 corporate offtakers also purchased about 42TWH directly through PPAs, which suggests corporations are buying 1.5x more renewable energy ‘indirectly’ through RECs than directly through using renewables, which would be a somewhat surprising finding.

Average REC pricing was around $1/MWH ($0.1c/kWh) in 2019-20, although some RECs were commercialized for as much as 15-40c/kWh. In our view, paying a mere 0.1c/kWh for a REC makes it challenging to claim that your purchase has been the decisive factor that caused a wind or solar project to go ahead, when the wind or solar power is also selling its power to the grid at 6-8c/kWh. This is different from a nature-based carbon credit, where the $3-50/ton CO2 price comprises the vast majority, or potentially all, of a reforestation project’s revenues (models below).

How reliable? Each REC is given a unique identification code, to ensure it is not double-counted. Ideally, RECs are also certified by independent consumer protection bodies, such as Green-E. And when purchased, you will receive a legal assurance that the RECs have been retired, so they cannot be re-sold multiple times over.

Finally, some of the largest purchasers of RECs (Google, Amazon, the US Department of Defence) have written policies favoring direct renewables purchases, while ensuring that purchased RECs are “additional” (i.e., they support new, incremental projects) and ideally also geographically proximal. Nevertheless, there can be some strange implications to RECs, discussed below.

Strange Implications: accounting for RECs?

Rooftop solar: what implications? Many rooftop solar installations in the US are leased. By law, the solar installer often retains the right to sell RECs originating from that solar panel. To re-iterate, if those RECs are sold to a third-party, then that third party is the legal “user” of the green energy attributes from the solar panel. So even if my electric vehicle is charging directly from the solar panel – even if I am holding the direct cable linking the two; even if I can see that the vehicle’s charging rate falls when a cloud passes overhead — I may no longer be able to claim that my electric vehicle is being charged by solar energy, as I am no longer the owner of that claim.

Electric vehicles: what implications? RECs matter for the greenness of electric vehicles and other electrically powered devices. We estimate that a typical electric vehicle has 50% lower CO2 intensity per mile than an ICE car, if it is charged from the US grid today (model below). But in fact, the EV numbers will be slightly worse than we are showing below. Our estimates assume an overall CO2 intensity of 0.42kg/kWh for the US grid, which blends the share of coal, gas, nuclear, renewables, et al. However, due to the sale of RECs, debatably, I can no longer claim some of those renewables are part of my grid mix, as they have already been claimed by the purchasers of those RECs. Because of RECs, you cannot simply assume that the electricity pulled from a grid with 20% renewables itself comprises 20% renewables.

Green hydrogen: what implications? The blending of RECs with green hydrogen could become a minefield of complexity. For example, imagine a hydrogen electrolyser that is powered by a wind turbine. If you sell RECs against the wind turbine, does this transform the green hydrogen into grey hydrogen?! Conversely, if you power a hydrogen electrolyser around the clock using a coal plant, and then buy enough RECs, could you claim that the hydrogen was green?! My personal intuition is that green hydrogen projects will likely need to be very careful around any REC involvement and should probably avoid them altogether.

Coal power: what implications? Another strange implication is that RECs could be seen to slow the shift away from CO2 intensive coal to lower carbon electricity sources, in the way that is required on our ‘roadmap to net zero‘. For example, if I buy my power from a coal plant, then legally, I can ‘decarbonize’ my power purchases for a cost of $1-6/ton of CO2-equivalents, by buying RECs ($1-5/MWH cost divided by 0.8-1.0 T CO2/MWH CO2 intensity in coal power). This is an order of magnitude cheaper than, say, installing CCS at the coal plant, which is likely to cost well over $75/ton; or improve its thermal efficiency with heat-exchangers ($50/ton); or switch to a 50-60% lower-carbon gas plant ($0-80/ton). Thus one might fear that paying to “have my coal plant legally treated as a solar plant” is actually crowding out genuine decarbonization.

Nature based carbon offsets versus renewable energy credits?

My own personal intuition is that RECs may have a role for some consumers that want to incentivize renewable energy projects, but nature-based carbon offsets feel “more valid” as a means to drive global decarbonization.

For example, the certificate below gives me the legal right to claim I purchased 20MWH of renewable electricity in 2020, which covers 100% of the estimated electricity from Thunder Said Energy’s 2 full time employees, working in heated and air conditioned (home) offices, and sending 1M emails per year (our distribution list is getting quite large). So legally, for the mere cost of $100, I can now claim Thunder Said Energy was fully powered by renewable energy in 2020.

But at some level, I know full well I was sitting in New Haven, Connecticut in 2020, buying electricity that was mostly sourced from natural gas (I used to walk past the generating plant on the way to the swimming pool). And I also doubt that my purchase has incentivized any new renewable projects to go ahead, at a price of 0.5c/kWh (which in turn has been sub-divided between commercial entities, REC traders and renewable projects themselves).

This simply “feels different” from my nature-based carbon offset purchases. Last year I engaged two tree planting charities to plant a set number of incremental trees to offset all of TSE’s CO2 (note below). Nature based solutions can also be used to offset broader CO2 emissions, beyond just electricity purchases.

Nature based solutions do have challenges. It is important to ensure they are additional, reliable, long-lived and biodiverse. But the largest pushback we have tabulated (below) is that they are a distraction from true decarbonization. Some of their most vehement critics of NBSs call them “modern day indulgences”. Puzzlingly, some of the critics making this argument have had no issue advocating for RECs over the past twenty years.

Our own view, to be clear, is that NBSs will comprise c25% of the heavy-lifting on the road to net zero. They must also be combined with efforts to develop 500GW pa of renewables, improve global energy efficiency by c25% and develop 10GTpa of CCUS opportunities. But NBSs may slowly overtake RECs as the most favored carbon offset option globally.

Solid state batteries: will they change the world?

Solid state batteries promise 2x higher energy density than traditional lithium ion, with 3x faster charging and lower risk of fires. Thus they could re-shape global energy, especially heavy trucks. But the industry has been marooned by uncontrollable cell degradation. QuantumScape’s disclosures suggest it is light years ahead. Many of its claims are supported by patents. But costs may remain high. These are the conclusions in our new 20-page report.


Solid state battery technology is explained on pages 2-4, enabling the replacement of graphite anodes in conventional lithium ion batteries with pure lithium anodes, which have 10x higher charge density.

How would this change the energy industry? Our conclusions are spelled out on pages 5-11, covering electric vehicles, consumer electronics, heavy trucks, aviation, drones, other futuristic sci-fi concepts (!) and oil markets.

Technical challenges remain. Pages 12-14 outline our “top five issues”, based on reviewing over a dozen technical papers that were published in the past year.

The costs and CO2 intensities of solid-state batteries are going to be crucial. We have estimated both on pages 15-18, starting with our models of conventional lithium ion batteries, then adapting the numbers.

Has Quantumscape cracked the code? To answer this question, we reviewed 25 of the company’s patents from 2019-20. The positive is a focus on manufacturing methods, to meet 2023-24 commerciality targets. But we also draw conclusions on the avoidance of dendrites, proprietary catholytes and manufacturing costs.

Nuclear power: what role in the energy transition?

Uranium markets could be 50-75M lbs under-supplied by 2030. This deficit is deeper than other commodities in our roadmap to  net zero. Demand is driven by China, constructing reactors for 50-70% less than the West, yielding zero carbon power at 6-8c/kWh. This 18-page note presents the outlook for nuclear in the energy transition and screens uranium  miners.


An overview of the nuclear power industry is outlined on pages 2-5, in order to understand the market, its sub-components, and the energy-economics of nuclear power generation.

Capex costs have held back nuclear growth in the West, as heavy investments and devastating delays can kill IRRs and require 16c/kWh levellized costs (pages 6-7).

China is different, constructing new reactors for 50-70% less than the West, yielding passable economics at 6-8c/kwh, while generating clean baseload power (pages 8-9).

China drives our demand forecasts, underpinning 75% of future global demand on our ‘roadmap to net zero’, with stark upside as a diversification to under-supplied LNG markets, if China exports its technology and as new start-ups require inventory builds (pages 10-13).

Impacts on the uranium market are quantified on page 14. We are bridging to 50-75M lbs of under-supply by 2030, with risks skewed to the upside.

Uranium prices must re-inflate, from sub-$30/lb to $60-90/lb marginal costs (page 15).

Uranium miners are screened on pages 16-18, including profiles of ten public companies, from incumbents to early-stage developers. Rare Earth metals are a common by-product of uranium mining and also relevant to the energy transition.

Oil demand: the rise of autonomous vehicles?

We are raising our medium-term oil demand forecasts by 2.5-3.0 Mbpd to reflect the growing reality of autonomous vehicles. AVs eventually improve fuel economy in cars and trucks by 15-35% and displace 1.2 Mbpd of air travel. But their convenience also increases total travel demand. This 20-page note outlines the opportunity and leading companies.


Patent activity into autonomous vehicles is accelerating at the second-fastest rate of any technology in the future of energy. We review fifty patents into AVs and conclude Level 5 autonomy remains science fiction, but Level 4 applications are credible within 2-5 years (pages 2-5).

Impacts on trucking fuel economy are explored on pages 6-8, including technical papers into platooning and other efficiency gains.

Impacts on passenger vehicles are presented on pages 9-10. Efficiency gains are offset by greater demand for increasingly convenient mobility.

Long distance journeys above 100-miles comprise 40% of all travel miles today. 50% of this market is currently serviced by plane, but we expect switching from aviation to autonomous vehicles (pages 11-14).

Impacts on total oil demand are bridged on pages 15-17, running through our assumptions, category-by-category. Our 2030-40 oil demand forecasts are raised by 2.5 – 3.0 Mbpd.

Five broad implications for different industries and sub-industries are spelled out on page 18. We are increasingly constructive on fuel retail businesses, particularly those selling carbon offsets to decarbonize long-distance car trips.

Leading companies in autonomous vehicles are diligenced in our full screen. Ten of the most exciting companies are profiled on pages 19-20.

LNG in the energy transition: rewriting history?

A vast new up-cycle for LNG is in the offing, to meet energy transition goals, by displacing coal and improving industrial efficiency. 2024-25 LNG markets could by 100MTpa under-supplied, taking prices above $9/mcf. But at the same time, emerging technologies are re-shaping the industry, so well-run greenfield projects may resist the cost over-runs that marred the last cycle. This 18-page note outlines who might benefit and how.


Global LNG supplies need to rise at an 8% CAGR to meet the energy transition objectives in our decarbonization roadmaps for China, Europe and broader industrial heat, as spelled out on pages 2-4.

But global LNG supplies are currently only set to rise at half of this rate, leaving a potential supply gap of 100MTpa by mid-decade, exacerbated by delays and deferrals amidst COVID (page 5).

Marginal costs for the LNG industry are disaggregated on pages 6-8, based on a detailed breakdown of capex costs, including upside-downside analysis of project characteristics.

Can future projects resist re-inflation if the industry undergoes a vast new up-cycle, as foreseen in our models? We present our reasons for optimism on pages 9-14, outlining evidence from 40 recent patents, plus the best new technologies from technical papers. This shows what the most resilient and lowest-risk projects will look like.

Beneficiaries in the LNG supply chain are described on pages 15-16, including next-generational modularization technologies, drone technologies to de-risk construction and the use of additive manufacturing for hard-to-manufacture components.

Beneficiaries among new LNG projects are described on pages 17-18, profiling examples and opportunities.