Local Carbon Emission Regulations & Policies Have Global Impacts

Remember the saying “Think global, act local?” Syntax errors aside, this mantra appears to be influencing policymakers around the world who are implementing carbon emission regulations to encourage companies to reduce their carbon footprints.

Although these new decarbonization and disclosure policies are local, they have global impacts. The EU’s Carbon Border Adjustment Mechanism (CBAM) and California’s recent Climate Corporate Data Accountability Act are just two recent examples of localized policies that will affect companies far beyond their respective legislative jurisdictions.

The EU’s Carbon Border Adjustment Mechanism

The European Commission is working on reducing the carbon footprint of industrial materials such as cement, aluminum, and steel.  But regulating the carbon footprint of materials manufactured in the EU runs the risk that manufacturers will move production outside the EU, geographically relocating the carbon emissions but not reducing them (what is known as “carbon leakage”).

So, the European Commission created the Carbon Border Adjustment Mechanism (CBAM), a carbon emission regulation that pressures companies at a global level to shift to more sustainable production. 

CBAM Doesn’t Just Affect EU Companies

CBAM’s goal is to “put a fair price on the carbon emitted during the production of carbon-intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries.” CBAM will initially focus on carbon-intensive goods such as cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. The regulation will require both EU-based companies as well as any company importing these goods into the EU to report the GHG emissions (direct and indirect) embedded in the products. EU importers of relevant goods must register with national authorities where they can buy CBAM certificates (priced based on weekly ETS allowances^[1]). The importer then reports the emissions embedded in its imported goods and submits a corresponding amount of CBAM certificates annually. The image below from the European Commission provides a succinct explanation of the program.

ETS allowances tend to be pricey, so if you can mitigate your emissions for less than 80 euros/t (see this site for recent auction prices), it’s economical to do so. Spoiler – most PPAs have an implied carbon reduction cost less than 80 euros/t!

The key point here is that CBAM will affect any manufacturer of these products currently selling or hoping to sell to European markets – regardless of where the manufacturer is located. CBAM becomes fully enforceable on January 1, 2026, which gives manufacturers a relatively short runway to mitigate their carbon intensity or face financial penalties for noncompliance. For companies wishing to do business in the EU, evaluating clean power options for their energy-intensive operations will become a necessity.

California’s Climate Corporate Data Accountability Act

California’s landmark SB253 (the Climate Corporate Data Accountability Act, or CCDAA) is another example of a local regulation that will affect companies globally. The state law requires public and private companies with over $1B in revenue doing business in California to disclose their scope 1, 2, and 3 emissions (starting in 2026). 

As with CBAM, the key point here is that any company with more than $1B in annual revenue that operates in California (even if headquartered elsewhere) will have to report both direct and indirect emissions. (Estimates project that the new law will impact approximately 5,300 companies.) If you are a large company doing business in California, you need to get smart about reporting mechanisms – and you probably also want to evaluate ways to reduce your emissions. 

Plan Ahead for More Carbon Emission Regulations 

Although local carbon emission regulations may use different enforcement mechanisms – such as financial penalties or disclosure requirements – the broad goal is the same: to require companies to track their GHG emissions (Scope 1, 2, and 3) and evaluate ways to reduce them. Both CBAM and the CCDAA demonstrate the far-reaching impact locally enacted policies will have on companies with global operations.

Organizations that want to continue to do business globally need to plan for increasing carbon disclosure and tariff policies by acting now to reduce their emissions. Clean power procurement will play a big role in decarbonization, particularly for electricity-intensive industries like aluminum and cement production. Contact us at hello@verse.inc to learn more about how to build the optimal future-proofed clean power portfolio for your business.

^[1] From Eurostat: “An emissions trading system, also known as emissions trading scheme and abbreviated as ETS, is a market mechanism that allows those bodies (such as countries, companies or manufacturing plants) which emit (release) greenhouse gases into the atmosphere, to buy and sell these emissions (as permits or allowances) amongst themselves.”

**This interview was originally posted on CEBA’s website.

What prompted your organization to join the CEBA community? 

Verse’s mission is to unlock the benefits of clean energy for organizations everywhere. We’re doing that by developing software that uses generative AI to make buying and managing clean energy faster, easier, and less expensive than it is today. CEBA’s work convening and supporting organizations interested in procuring clean power is a perfect fit for us. We’re excited to collaborate with CEBA to showcase the power of technology in accelerating and scaling corporate clean energy adoption.

What does the future of clean energy look like for your organization? 

Verse’s vision of the future of clean energy is AI- and software-driven. The world is at an inflection point of AI-enabled solutions; we want to apply the capabilities of generative AI to clean power procurement.

Verse’s Aria software platform leverages this technology to help companies define their clean power goals, design the best portfolio to meet those goals, manage their clean energy assets, and verifiably report on their emissions and financial metrics.

Recent policy changes, the evolution of various regulatory and voluntary frameworks, and the increasing complexity of energy markets and clean energy assets are quickly exceeding the analytical capabilities of humans and spreadsheets. Clean energy customers will increasingly require the computing power of AI to synthesize concepts and analyze potential scenarios to develop future-proofed clean power strategies.

What has been the most interesting clean energy project during your time with your organization?  

One exciting case study involved helping a company figure out what clean power procurement philosophy would best meet its needs.

This customer wanted to power their operations with clean energy, but needed to answer several detailed questions before acting.

• Location matching: Can we buy clean energy from anywhere in the country? Or from the same grid?​
• Time matching: Should we match clean power on an annual basis? Monthly? Hourly?​
• Emissions matching: How much greenhouse gas emissions will my clean energy purchase help avoid?

Using the Aria Goal Setting app the customer received nine possible procurement philosophies to analyze considering different permutations (e.g., 100% clean energy, carbon-matching, location-matching, and/or time-matching).

Aria uses mathematical optimization, combined with pre-loaded, 20-year hourly market forecasts to evaluate the cost, emissions, and time-matching implications of the nine scenarios.

The customer presented the outputs from Aria to their senior leadership team, which was then able to make a data-driven decision, selecting the procurement philosophy that best met their objectives while staying within budget for clean energy purchases.

By defining their clean power goals, the customer was able to move forward with confidence in their clean energy journey and is now going to market to source clean energy.

Envision a 90% carbon-free U.S. electricity system by 2030 – what is the next step toward a carbon-free energy future? 

It’s hard to pick just one! There are several critical steps that need to coalesce, including streamlining interconnection processes and expanding transmission and grid infrastructure. The step we’re focused on is making clean energy procurement faster, easier, and less expensive than it is today so more organizations can access the benefits of clean energy. We are confident we can leverage powerful emerging technologies — like generative AI — to demystify this complex field and make a real difference in how organizations source and manage their power.

Get involved as a CEBA member!

Start Your Corporate Clean Energy Journey

Many corporations are making a commitment to sustainability, driven by evolving regulatory standards, stakeholder pressure, energy market volatility, and increasingly severe and evident climate change.

Corporate clean energy procurement is a critical component of achieving our collective global sustainability goals. But how do you get from setting a goal to verifiable, future-proofed renewable energy purchases? If your company has made a commitment to sustainability, check out these considerations to help you navigate the process of buying clean energy.

Audit Your Energy Use and Needs

Before you buy clean energy, you need to conduct a thorough energy audit to understand your current energy consumption patterns and identify areas for improvement.

First, assess your energy needs. Key points to consider include:

• Quantity
  • You can’t develop an accurate clean energy procurement strategy without knowing how much energy you use now and projecting how much you’ll need in the future. How much energy do your facilities require? (This is known as your “load”.) Do you expect your hourly load to grow over the next 10+ years?
• Location
  • Where is your load located? Geography matters when thinking about emissions reduction. Utilities each have their own green tariffs, and each electric grid and wholesale market has unique pricing, congestion, and renewable penetration. These are all factors that affect the cost and carbon-reduction metrics of clean power resources. Emerging voluntary standards and regulatory requirements may also include locational elements that encourage or require you to procure clean energy generation on the grid where you use it.
• Timing
  • Consider your demand periods. Time is also a key component of effective emissions reduction. For instance, if you purchase clean energy from a solar project during the day when renewable resources are abundant but use most of your energy in the evening (drawing from a fossil-fueled grid), you may not see the emissions impact you hoped for.

Set Clean Energy Goals

Establish clear and achievable clean energy goals aligned with your sustainability commitment. Determine the renewable energy strategy that best suits your needs and set a timeline for achieving your renewable targets. Long interconnection queues and construction timelines in the U.S. mean that the commercial operations date of projects may be several years in the future.

“Establish clean energy goals” is very easy to say but very hard to do. This step is often extremely difficult for companies that don’t have deep energy market expertise. How do you know if you should pursue renewable energy credits (RECs), or corporate power purchase agreements (PPAs)? What are the benefits and drawbacks of hourly matching vs. annual matching? Are there utility green tariffs available to you? Does your procurement need to be additional or is it sufficient to support existing projects? Should you try to optimize for 100% RE, carbon matching or 24/7 carbon-free energy (24/7 CFE), or some combination of the three? Maybe you need 100% renewable energy on an annual basis, with 80% CFE? (Check out these helpful resources for explanations of 24/7 CFE (including David Roberts’ Volts podcast) and the Emissions First principles). Tools like Aria can help ensure you – and your leadership team – understand these concepts and their trade-offs so you can set the optimal clean energy goals for your business and de-risk your clean energy procurement strategy.

Explore Renewable Energy Options

Familiarize yourself with the many renewable energy resources available for procurement. These can include solar, wind, lithium-ion energy storage, hydroelectric, geothermal, biomass, nuclear, clean hydrogen, power generation with carbon capture and storage, and long-duration energy storage technologies. Each source has unique benefits and considerations based on the emissions reduction strategy you choose. (Side note: Google has an interesting new paper that explores some of these technologies and the role corporate clean energy buyers can play in “helping to address financing, commercial, and other barriers that many of these technologies face today.”)

Assess which options align best with your energy needs, emissions goals (e.g., companies aiming for net zero emissions with 24/7 carbon-free energy will need to incorporate energy storage), geographical location, and budget constraints (for instance, 24/7 CFE requires hourly matching and is more expensive than less complex goals like 100% RE on an annual basis).

Verse can help you determine the right mix of clean power resources. If you can say how much carbon you want to mitigate, what your budget is, and how much exposure you’re willing to have in your clean energy contracts, our software and services can optimize your clean power procurement.

Your Commitment to Sustainability Is Achievable — Don’t Be Discouraged!

Clean energy procurement is a crucial step towards reducing carbon emissions and mitigating the impact of climate change. But it’s easy to get overwhelmed by the variety of options and contractual complexity. Sometimes, educational resources geared toward sophisticated power buyers can be more confusing than helpful. But tools exist specifically to make the process faster, easier, and more cost-effective – from determining your clean power procurement philosophy to analyzing clean energy asset options and managing requests for offers (RFOs).

Verse works with you to accomplish the above steps and determine the optimal resources to accelerate your clean energy journey. Drop us a note to learn more! Together, we can create a more sustainable future for generations to come.