The Exchanges

Q but actually, um, we do have A longstanding precedent in this country for a book and claim system in the case of electrons more than in molecules, which is renewable energy credits. So, I mean, talk a little bit about how the rec market influences your thinking about all these next-gen book and claim systems. Is it a model to mimic, or is it some, is it a cautionary tale?

A There are pluses and minuses from the rec model. So on the plus side, it's a system that works. There are registries, uh, like Emirates, That have demonstrated effective transfer so that buyers can be confident that they own the attributes. No one else does, and that's really important to eliminate or reduce the potential for double counting. Also, RECs have generated additional revenue, so developers who have funded projects like solar and wind projects know that additional money is coming to them in the form of RECs, and this makes it more appetizing for new investment and new development Which one could say is indirectly, uh, additional. Uh, so on that additionality point, though, that is a potential weakness for RECS because the projects are already built. So some of the skeptics may say, hey, look, did you really need the revenue from RECS to make that solar array? And this is different than in some of the heart, most of the heart debate sectors where that revenue makes the crucial difference between purchasing a sustainable product And not actually covering the differential and not creating that demand signal. So that is one of the lessons that has been learned from, from the rec market. The other piece that has been learned is around emissions reductions. Uh, it is difficult to understand the carbon intensity right on a real time basis from those electrons. And we have a…

AI assessment note: “There are pluses and minuses from the rec model.”

Q in historic book and claim systems, because you'll have the producer of the thing claiming they made a green thing. They'll sell off the environmental attribute. They'll keep claiming that it was green, the thing that they made, but actually what they're selling away generally is the rights to call it green, right? So how do you, how do you avoid that kind of double counting or double credit claiming?

A Yeah, so I think with, with fuels, uh, there are two ways, and then I'll add another important consideration for materials. So for fuels, ideally, there's the interoperability between registries. So if a batch number shows up in one, It makes it very difficult to then register that same batch on another competitor's registry. So this is important because we want to avoid double issuance, and that is something that can be avoided when the registries talk to each other, or when there's even an umbrella system on top of the registries, such as something called an issuing body, where all of the credits first go to the issuing body, and that serves as a clearinghouse Uh, and then they can be released to individual registries. So, so that's one important way. Um, the other way, as you mentioned, right, if you're a recipient of the physical molecules that have actually been stripped, you might assume, uh, or worse, that you decide to claim those attributes that you, you cannot own. So here, here it's important that, uh, customers receive at notice that they're only getting What is potentially a commodity without any environmental benefits and that the only way you could claim benefits is by using a registry. So perhaps a solution in the future would be that all sustainable products go onto registries. That would be the preference because then you have a system where all the credits ex…

AI assessment note: “for fuels, ideally, there's the interoperability between registries.”

Q Okay, so aviation clearly kind of the furthest along, as you said, setting a precedent for other industries. Let's for a minute just talk about other Heavy transportation. That's the logical next step. We've got a vibrant market for SAF. What about Maritime? What about long-distance trucking, things like that?

A Yeah, so in Maritime, we've seen a number of pilots from large companies like Maersk, uh, and the Zemba group, which I mentioned, the Buyer's Alliance, uh, they have done one procurement so far, and Hapic Lloyd, uh, won that procurement. They had requirements on emissions reductions, had to get 90% or better on a life cycle basis, so it ended up being RNG. Um, and so Zumba is repeating that, and now they're going through procurement that, uh, I think the first procurement reduces greenhouse gas emissions by about 80,000 metric tons. This next procurement is almost half a million metric tons. And, uh, again, it has a 90% or better, uh, carbon intensity reduction. So, There is movement. I think, ah, that shipping may be a year or so behind aviation, but we are seeing, ah, interest in, in the sector. Ah, one of the differences between aviation and shipping is that with aviation fuels, you've got a drop in solution, right? So any staff that meets the spec can go into any aircraft, and that's not the case with shipping. They've got something called, they like to call the rainbow donut, which is, ah, 10 or more different fuel options. They have different specs, but those will require different engines. And we'll have different applications, so it's going to be potentially a little trickier to scale the solution and shipping, and there's also a question of, is there the same willingne…

AI assessment note: “Yeah, so in Maritime, we've seen a number of pilots from large companies”

Q What about things like certification? Um, like certifying recs as they are produced, like what, what can we learn from how, what's gone well and not well there in historic booking claim systems?

A Yeah, so the certification is the glue that holds it all together because it provides trust to consumers. So, full disclosure, I am on the board of a non-profit that's a standard body called the Roundtable Sustainable Biomaterials. They've been critical in both aviation and marine sectors in establishing these guidelines that show Look, you actually have a carbon intensity, it follows a certain modeling methodology, and there are other factors besides climate benefits that are important. You want to make sure that the, the labor and the workers that are involved got fair wages. You want to make sure that habitat was protected and water conserved, etc. So the certification provides that confidence that Environmental impacts were minimized and, uh, that there are auditors and very, uh, and auditing, uh, on a regular basis to check out, to make, make sure that the requirements were followed. So that is really, really helpful in the molecule world. And, uh, if it's okay to share a story, there was a barge that sat off of the coast of California that was uncertified SAF. And every, all our customers said, hey, there's a great deal on SAF. We're not sure we should buy it because we don't know where it's coming from, and, uh, it happens to be about half the cost of your product, and this is, uh, my company, World Energy.

AI assessment note: “certification is the glue that holds it all together because it provides trust to consumers”

Q Do you think of book and claim as being primarily a mechanism for kind of real-time transactions, or maybe not real-time, but short-term transactions? Or is it Predominantly in service of long-term forward contracts, so that you, I think you mentioned this before, but like to enable bankability of- Of projects.

A So I, I'll put on my producer's hat. I think what we would like to see on the supply side is these longer term contracts with creditworthy counterparties. And, uh, we can sell products potentially to tech firms, hyperscalers, as you mentioned, Shale, uh, consulting companies, uh, other companies that have, uh, different, uh, profit margins compared to The suppliers within a sector like in aviation, airlines are going to have very different credit risks compared to, say, tech firms. And so, if we can sign long-term contracts, the longer the better, that that will provide confidence to our investors that there really is a willingness to pay, and this is what will help us scale the industry, that we can sell to unconventional customers, right? A tech firm is not Using SAF per se, so we can reach them through book and claim, and then through a long-term contract, we can then show the banks and show the investors that there really is a market here, and it is significant. Let's take aviation, for example. 25% of passengers are business travelers. Uh, over one-third of the emissions come from businesses because they're almost all of the cargo emissions, and Business travelers tend to, to fly in, in larger seating, which is a larger part of the, the, the footprint of the air aircraft. So if we captured a portion of this market, it'd be far greater than the total SAF use today. So, uh, …

AI assessment note: “what we would like to see on the supply side is these longer term contracts”

Q or whatever, is going to be locational in the sense It's that you gotta find your cheapest input source of energy or, or feedstock or whatever it is. Um, but that isn't necessarily where your, your customers are directly. And so you have this divide you have to bridge and booking claim is a good way to do that. How much of it do we see happening in those categories?

A Again, we've got some market leadership from the Rocky Mountain Institute. So they have got the Steel Buyers platform and there's an RFP. It's actually live right now. Uh, and in a month or so, uh, The proposals will be due, and that's to buy over a million, uh, tons of steel per annum equivalent of green steel, um, and two-thirds of that actually can be purchased book and claim. So, uh, we're just seeing the launch of, of this, and, uh, what is different potentially with materials is that you could have interventions, not, uh, just on the, um, end product, but potentially as an intermediate product. For example, you can make green iron And that may be the major, represent the majority of emissions for virgin steel, uh, and it may be easier to, uh, to gauge the emissions reductions or to focus your actions, right, upstream of the end product. There are challenges, though, with, with these materials, because, uh, let's take concrete, for example, you've got non-uniform products. You may have your precast and your ready mix, uh, and you may also have high compression and low compression, right, for high rises or for sidewalks. And you have different regions and different carbon intensities. So there's going to be some tricky carbon accounting that's going to be necessary to establish that baseline value. Um, but it is promising that you could do an intervention upstream of the, t…

AI assessment note: “that's to buy over a million, uh, tons of steel per annum”