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Trade Talks: Spotlight on Carbon

April 25, 2023
LDC Trade Talks - Spotlight on Carbon Solutions

Our Carbon Solutions Platform’s mission is to build a carbon reduction project portfolio within and beyond LDC’s operations, as a source of high-quality carbon credits and removals to help meet our own and our customers’ Greenhouse Gas (GHG) emissions reduction targets, and ultimately mitigate global warming.

Read on to find out how Dylan Penna, our Carbon Originator for North America, does just that from his desk in Connecticut, US.

Hi, Dylan – can you tell us about your role at LDC?

I sit on the Carbon Solutions Platform in LDC’s Wilton office, in Connecticut, working to expand our portfolio of high-quality carbon credits. We trade on the North American carbon markets and work with other LDC businesses to find potential projects in our value chains that can support LDC’s decarbonization journey.

Summarizing my daily routine, I spend the first half of my day catching up with our team in Switzerland (since we work in different time zones) to discuss project advancements and potential trades, and checking the latest news on carbon, finance and geopolitics from around the globe. After lunch, I spend time researching North America-specific project developments and catching up with brokers and other traders to share thoughts and ideas. You do a handful of trades a month on voluntary carbon markets, most of the time – so you’re not as glued to the screen as other traders might be!

Tell us about your first carbon trade at LDC.

It wasn’t that long ago! In February 2022, just two weeks after joining the Group, we bought credits from a large, well-known wind energy project in the US. I don’t think many of my friends or colleagues in the market expected us to get into the action so quickly – it’s nice to surprise people!

EPA Carbon Scope 1 and 2 emissions chart
Source: United States Environmental Protection Agency – Corporate Climate Leadership

Can you explain how a company like LDC measures their carbon footprint?

To measure carbon emissions across our value chains, we first need to identify all sources of emissions: for example, fuel and electricity consumption for our own operations (Scopes 1 and 2) and emissions generated from third party activities in our value chains (Scope 3).

We then apply emissions factors (a measurement of emissions by activity) to this data, which gives us a GHG inventory.

On that basis, we can work to reduce our emissions via energy efficiency projects, shifts away from fossil fuels and toward renewable energy sources, and work with our business partners to support other emission-reducing initiatives and practices, such as regenerative agriculture

How do carbon credits work, and why they are important?

Carbon credits are an important part in the decarbonization process because they allow companies to address unavoidable emissions. Many companies have GHG emissions associated with their operations or value chains that they can’t totally avoid, due to cost issues or the limitations of current technology. A company can buy carbon credits to offset inevitable emissions.

So, does that mean a company can reduce its carbon footprint by using carbon credits?

It’s important to understand that companies cannot ‘reduce’ their emissions with carbon credits. Instead, these credits compensate for emissions that are currently difficult, or impossible, to reduce or avoid. Carbon credits can offset the company’s unavoidable emissions, but they contribute to reducing emissions outside a company’s own carbon footprint.

Reducing the company’s own carbon footprint can be achieved via energy efficiency projects, use of renewable energy sources and by encouraging suppliers to support emission-reducing initiatives.

How do companies vary in their approach to using carbon credits?

It always fascinates me to see how different companies are using carbon credits to offset their emissions decide what type of credits they will buy. Some are extremely strict on project types and geography based on their physical operations, some intentionally go outside their physical footprint to buy credits from projects in developing countries or underserved communities, and others are dictated by budget… The differences keep me on my toes to stay abreast of buyer sentiment.

At LDC, we are selective in the projects from which we source carbon credits, both for internal use and for trading, with rigorous due diligence on the quality of each project. An example was the use of carbon credits and biofuels on LDC’s first carbon neutral juice shipment in 2022.

To what extent do you need to know the specific attributes of the different carbon offset projects you deal with?

For me, it’s hugely important. When we trade carbon credits, we must be close to and familiar with the underlying project that produced the carbon credits – the project type, location, methodology used and more. That way, we can confidently trade high-quality carbon credits with real environmental impacts, including for our own voluntary offsetting in the future, too.

What are mandatory (or compliance) and voluntary carbon markets, and is LDC involved in both?

Mandatory credits are used by companies and governments that are legally required to offset their emissions, and must surrender allowances; whereas voluntary credits give private companies and individuals the opportunity to purchase carbon credits to advance their emissions reduction journey.

Our voluntary carbon credit trading consists primarily of bilateral, physical purchases and sales with developers and buyers of high-quality carbon credits from various projects – such as forestry projects in the US and South America, and renewable energy projects in China.

In mandatory markets – namely the EU and US – we currently trade financial contracts based on market conditions and price action.

LDC Carbon Solutions Team in Geneva, Switzerland

Since joining the Carbon Solutions team, what’s the biggest change you’ve noticed at LDC?

I’m increasingly involved in conversations about carbon, renewables and other related issues. Surely plenty of colleagues were discussing these topics before the creation of the Carbon Solutions Platform, but I believe its existence has convinced more people that many opportunities and concerns are more actionable for LDC now than previously, including potential emissions reduction projects in our existing value chains.

Can you expand further on these potential projects, and the benefits?

As a global agricultural merchant and processor, LDC already has relationships with many farmers seeking to advance regenerative agriculture, which is crucial to reduce our Scope 3 emissions.

We can provide financial incentives to farmers to adopt new regenerative practices or expand existing regenerative practices, and then work alongside them to collect data that can be turned into carbon credits. Once the carbon credits are created, LDC can monetize these to further build on incentives offered to farmers.

Ultimately, carbon credits generated from product-specific carbon footprints – either from projects we develop in our own portfolio or purchased from external projects – can serve to offer certified carbon-offset products to our customers.

What do you expect to change in the next five years that will massively shift how businesses function?

We will see a variety of new compliance schemes on carbon emissions, low carbon fuels and other emissions-related markets in developed countries that will have a major impact on local economies, as they have already done in states with existing markets, such as California in the US.

An example in California’s cap-and-trade market is the Improved Forest Management carbon offset protocol, which has driven improved management of millions of acres of forested land across California and neighboring states.

Why did you choose to work in carbon trading?

Carbon trading fascinates me because our industry is inherently full of people who care about protecting the natural world, for the continuity of food and agricultural production.

At the same time, price action in our market is strongly impacted by macro conditions, so I’m excited by the exposure to a great mix of social, environmental and financial responsibility in my day-to-day.

What is your next big challenge at LDC?

Scaling up our business. We’ve recently done some great work in North America with some mid-sized transactions and early-stage project development work. 2023 will be all about scaling up for us.

What is the most enjoyable aspect of your role?

No two days are the same. As the Platform grows across geographies, there are always new challenges, ideas and opportunities popping up.

I also love the fact that every product we deal with helps to push our transition to a lower carbon, greener future – one step, one project, one transaction at a time!

Let’s say I want to become a Carbon Trader. What should I be interested in?

Carbon trading might be for you if you have an interest in energy policies, local environmental and emissions policies (on a state to state, country to country, or regional level), and an interest in sustainable projects – much voluntary carbon trading is focused on specific attributes of different carbon offset projects.

Why do you think getting involved in carbon markets is exciting?

Carbon and Carbon Credits Infographic

It’s a growing market, with great people and a bright future (both voluntary and mandatory markets), and the best way to get involved professionally is to join a large organization that trades, develops projects, and is committed to decarbonization – like LDC!

What would you say to those of us who want to participate in carbon credits in our personal lives?

There are quite a few retail vendors that sell carbon credits in small quantities to enable consumers to offset the footprint of their flights, car travel, etc. – each effort, big or small, counts!

Officially launched in 2021, LDC’s Carbon Solutions Platform was created to spearhead our global decarbonization journey, in line with our commitment to sustainable business.

The Carbon Solutions Platform supports our business lines to decarbonize their value chains and leads the company’s decarbonization journey, driving toward our new target to reduce LDC’s Scope 1 & 2 emissions by 33.6% by 2030, versus 2022.

Curious to learn more about carbon and carbon credits?

Check out our infographic.

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