In long logistical chains (found in steel, concrete, aviation, shipping and others) end consumers that want to pay a premium to cut their emissions (for example to comply with corporate decarbonisation promises) often have no way to pay the first link in that chain to go low-carbon. “Book and Claim” creates a market to do that. Consumers buy certificates, and producers get the money to fulfil the commitment. And a working system will bring to life the market signals that more quickly incentivise innovative producers, attract further investment, and accelerate scale-up and cost reduction. Inevitably, standards, regulations, monitoring and transparency are key, to avoid fraud and double counting. Thomas Koch Blank, Laura Hutchinson, Oscar Hernandez, Esther Sicong Li and Alexandra Wall at RMI describe how it works. They give as an example Sustainable Aviation Fuel (SAF): it’s expensive and desperately in need of rapid scale-up, and perfectly fits the model of the end user (a passenger or cargo) being distant from the fuel producer. The first ever joint SAF certificate purchase occurred this year, and the shipping sector is making moves to do the same. And regulators can also use Book and Claim as a flexible mechanism to enforce decarbonisation compliance in targeted sectors, especially where an emissions trading scheme doesn’t already exist, explain the authors. A growing number of organisations, including RMI, are developing the tools and guidelines.
Heavy industry and heavy transport — think steel, concrete, aviation, and shipping, to name a few — are essential to nearly everything we do and everything we consume. They are also a significant source of carbon emissions — taken together, accounting for nearly 30 percent of global greenhouse gas emissions each year. For many companies, these emissions are a part of the carbon footprint of the final good or service they sell — you may have heard this referred to as a product or business’s “embodied carbon,” or, in the case of corporate emissions accounting, as its “Scope 3” emissions.
Corporations are calling loudly and enthusiastically for ways to decrease these emissions in order to do business more sustainably and in response to increasing pressure from customers and shareholders. At the same time, promising decarbonisation efforts in heavy industry and heavy transport are struggling to raise funds needed to achieve commercial scale and wider adoption. Is there a way to connect the dots?
RMI is working on the solution in a number of ways. We are providing transparency into supply chain emissions, connecting heavy industry and transport decarbonisation leaders to corporate consumers, as well as working with investors and policymakers to ensure their actions can help decarbonisation happen faster. The newest mechanism we’re working on puts all the pieces together.
Creating market signals for demand
RMI and our partners have been working to connect the massive corporate demand for Scope 3 emissions savings directly to the market for low-emissions fuels and materials, in order to channel finance and create a market signal for nascent decarbonisation technologies. No easy feat. In fact, it has required building a market for a whole other product entirely: turning the emissions benefits of using low-emissions fuels and materials into certificates that corporates can buy, transparently and credibly, and making sure low-emission fuel and materials producers can use these funds to invest and scale up. It’s called “book and claim.”
What is Book and Claim?
Book and claim is a flexible model for verified information to flow — or chain of custody model — that allows clean fuel or materials producers to “book” the emissions savings of a good they’ve produced in one place, and customers to “claim” the emissions benefit from these goods for climate disclosures in a different place. But how can it help decarbonise industries?
Book and claim systems can connect ambitious buyers and sellers to decarbonise their value chains together, when physical offtake options don’t exist or would be prohibitively complex. Let’s take the example of a corporation that wants to decrease the climate impact of the flights its goods or employees take. Sustainable aviation fuel (SAF) is fuel made from waste or renewable feedstocks that can be used in a normal jet engine and can decrease the lifecycle emissions of flight by up to 99 percent, but currently its production is extremely limited and costs two to five times more than fossil-based jet fuel.
In this case, this corporate buyer would never ordinarily purchase jet fuel, so won’t be able to directly procure SAF, nor ensure that all of the flights its employees and goods take are using SAF. Instead, they can use a book and claim system which tracks the environmental attributes of a volume of SAF through a certificate.
…Auditing the emissions savings
The book and claim system allows corporate consumers to buy SAF certificates (called SAFc) that represent the certified lifecycle emissions reductions from cleanly-fuelled trips and then use them in corporate emissions reporting, with an auditable and credible trail of ownership. The completed transactions release funds into a solution that, if scaled and implemented for widespread use in planes, would achieve the desired decarbonisation.
Companies can purchase certificates from SAF producers or air transport providers, compensating them — or paying them upfront — for their investment in SAF and allowing them to continue to produce or buy the more costly alternative fuels. This incentivises airlines to make the switch to climate-friendlier fuels, knowing they can make up the price difference with the sale of certificates. And the more fuel and certificates are purchased, the more suppliers will scale up the production of these new fuels, driving down cost.
Because the market for low-emissions fuel like SAF is nascent, cleaner fuels are more expensive and not always available on routes where a consumer might require their use. Allowing consumers to purchase environmental attributes from clean fuel use means they can ensure a plane, ship or truck somewhere is being fuelled by clean energy. The system enables consumers to help transport companies cover their price premium, which otherwise represents a prohibitively high cost.
The transaction sends two crucial signals to the market: that there is a demonstrated and bankable demand for alternative, low- to zero-carbon fuels, and that supply needs to scale to meet it.
To ensure the system effectively enables decarbonisation efforts, book and claim systems need several, carefully-designed parts to ensure standardisation and transparency at each step.
The foundation of the system is real decarbonisation within the sector. As a critical first step, the physical supply chain must be independently verified to meet sustainability criteria via an established certification process: for example, the Roundtable on Sustainable Biomaterials (RSB) and the International Sustainability and Carbon Certification (ISCC) system’s standards for SAF. Next, the product’s attributes need to be decoupled and represented as a certificate, like SAFc. This certificate is what is “booked” and “claimed” by different actors, either in a registry or in an individual transaction.
A registry is a trusted platform that ensures that certificates represent real impact and are accounted for appropriately. Users need a well-governed system that can repeatably issue certificates with the same rules, track their ownership, and house a transparent record of who has “retired” — and can claim — each unit. A system like this — that adheres to a commonly accepted standard — creates an auditable trail of who can use these emissions reduction claims and actively mitigates double counting risks. Finally, after certificates are retired in a registry, consumers can claim them towards climate disclosure frameworks.
This disclosure process should be done following clear and commonly accepted emissions accounting and reporting guidance, such as accounting and reporting guidelines from Clean Skies for Tomorrow and Smart Freight Centre on SAFc climate disclosure.
Corporate customers, in partnership with air transport providers and SAF providers, are beginning to use this infrastructure as they procure SAF certificates (either bilaterally or via aggregated procurement mechanisms) to provide more structure and verifiability to their transactions.
First ever joint SAFc purchase
The Sustainable Aviation Buyers Alliance (SABA) facilitated the first ever joint SAFc purchase earlier this year, and just launched a second, 5-year procurement process. The Zero Emission Maritime Buyers Alliance (ZEMBA) launched earlier this year with the goal of pooling corporate demand for decarbonised shipping and will rely on book and claim systems to facilitate their effort. To meet emerging needs like this in the maritime shipping sector, the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping (MMMC), RMI, Danish Shipping, and Mærsk Oil Trading have outlined a design for a book and claim system, which MMMC and RMI are planning to move to a pilot phase in the coming months.
Realising the potential of Book and Claim
RMI and our partners are focusing efforts on making book and claim a robust, real solution to quickly spur heavy industry and transport into action. But let’s be clear: it is not a silver bullet. When available, direct procurement of decarbonised products is far simpler and preferable. However, we’re working on book and claim because it does have the potential to enable investment in heavy industrial transformation at unprecedented scale if implemented in a robust and coordinated way. Because of this, we are excited to announce our collaboration with the Smart Freight Centre in convening the Book and Claim Community, which will bring together leading efforts in this space.
Book and claim also has the potential to inspire and enable action beyond corporate consumers and supply chain actors. SAF book and claim is already enabling large, joint, and advance offtake agreements and other forward-looking investments from corporate customers and air transport providers, like Microsoft and Alaska Airlines’ investment in Twelve. These strong demand signals are starting to give financial institutions the confidence to invest in new production facilities that will break ground this decade. Regulators can also use book and claim as a flexible mechanism to enforce compliance obligations for emissions reductions or decarbonised products, especially where an emissions trading scheme doesn’t already exist.
Book and claim is fundamentally enabling for companies working to find more tangible means to support the decarbonisation of sectors whose services they consume, but that they don’t have direct or even indirect control of. The challenge for suppliers, consumers, and civil society in the coming years will be to find the right balance between innovation, pace, standardisation, and appropriate safeguards in each application to maximise this tool’s potential for widespread recognition and impact.
Thomas Koch Blank is a Senior Principal, Climate Aligned Industries, at RMI
Laura Hutchinson is a Manager, Climate-Aligned Industries at RMI
Oscar Hernandez is an Associate, Strategy Team at RMI
Esther Sicong Li is an Associate, Climate Intelligence at RMI
Alexandra Wall is a Strategic Communications Manager at RMI
This article is published with permission. Copyright 2023, Rocky Mountain Institute