Castalia’s blog
Globally, the water sector emits more than 2 billion tons of CO₂e annually, which corresponds to 5% of total global emissions. This is more than double the yearly emissions of the aviation and maritime sectors combined.
Additionally, there are 1.6 billion people who don’t have access to safe drinking water, and 2.8 billion people who don’t have access to safe sanitation3. The number of people who lack access to safe water and sanitation increases every day due to climate change, rapid urbanization, and lack of finance in the water sector.
Castalia and The University of Colorado collaborated on a research project to assess how voluntary carbon markets can help in reducing emissions from the water sector while contributing to the achievement of SDG 6, ‘safe water and sanitation for all’. The work was commissioned by The Sustainable Markets Initiative, WaterAid’s Resilient Water Accelerator, HSBC, VCMI, and Gold Standard.
As part of the study, we assessed the potential of emissions reduction in various water sub-sectors. According to our findings, if we maximize the use of voluntary carbon markets in the sub-sectors with the highest verifiable potential for emissions reductions, we could achieve over 445 million tons of CO₂e emissions reduction annually. This could yield $1.7 billion in carbon revenues annually, potentially mobilizing an additional $10.6 billion over the next 10 years for water sector investment.
In 2021, the global voluntary carbon market transacted 500 million tons of CO₂e. Materializing the full potential for voluntary carbon credits from water services could almost double the size of the global voluntary carbon market.
Using voluntary carbon markets for water also has co-benefits such as increasing access to water, boosting water sector resilience, improving sanitation, and preserving aquatic ecosystems.
To encourage the collaboration of relevant stakeholders to support WaterAid’s Resilient Water Accelerator Initiative, Castalia’s Chief Executive, David Ehrhardt, presented the potential of voluntary carbon markets to reduce emissions in the water sector during the COP 28.
You can access Castalia’s COP 28 presentation here: Voluntary-Carbon-Markets-for-the-Water-Sector
References
1. GWI. “Mapping Water’s Carbon Footprint,” 2022; Page 26. Greenhouse Gas Protocol. “GHG Protocol Agricultural Guidance Interpreting the Corporate Accounting and Reporting Standard for the Agricultural Sector.” https://ghgprotocol.org/sites/default/files/2022-12/GHG%20Protocol%20Agricultural%20Guidance%20%28April%2026%29_0.pdf
2. McKinsey. “Agriculture and Climate change,” 2020; Page 6. https://www.mckinsey.com/~/media/mckinsey/industries/agriculture/our%20insights/reducing%20agriculture%20emissions%20through%20improved%20farming%20practices/agriculture-and-climate-change.pdf
3. Emission from aviation and maritime transport sector is around 938.14 million tons CO₂e (2020). Ourworldindata.org. “Greenhouse Gas Emission by Sector, World.” https://ourworldindata.org/emissions-by-sector
4. UN Water. “WHO/UNICEF Joint Monitoring Program for Water Supply, Sanitation and Hygiene (JMP) – Progress on household drinking water, sanitation and hygiene 2000 – 2020,” 2021. https://www.unwater.org/publications/who/unicef-joint monitoringprogram-water-supply-sanitation-and-hygiene-jmp-progress-0.
In New Zealand, the “Local Water Done Well,” policy is set to replace the “Three Waters” regime. The Local Water Done Well policy is based on an alternative water reform put forth by “Communities 4 Local Democracy”, whom we advised.
The New Zealand Herald recently published a column written by Andreas Heuser, Managing Director at Castalia, about the Local Water Done Well policy.
Mr. Heuser outlines the key components of the Local Water Done Well policy, emphasizing its potential to address financial challenges within the water sector. Mr. Heuser dispels misunderstandings, particularly regarding the separation of balance sheets, and explains the policy’s focus on decentralization and community involvement.
The proposed framework involves creating separate corporatized water service providers (WSPs) owned by individuals or groups of councils. These WSPs would maintain independent accounts, subject to regulation by the Commerce Commission to ensure efficient expenditure. This approach, globally tested and successful in other utility sectors, aims to make WSPs credit-worthy entities, attracting capital and positively influencing credit ratings.
Heuser addresses concerns about financing challenges and explains the suggested mix of standard utility financing and targeted government support. The new policy encourages a case-by-case approach, with the government providing technical assistance to WSPs or councils facing financial challenges. Innovative solutions, such as a Ratepayer Assistance Scheme, revenue bonds, conventional LGFA finance with relaxed debt limits, and Crown support with equity finance, could be explored based on local needs and preferences.
Highlighting the importance of local involvement, Heuser stresses that communities should play a pivotal role in overcoming challenges. The column underscores the flexibility of Local Water Done Well, allowing local communities to shape its design based on specific circumstances. The example of Auckland is presented, where tough choices, like separating Watercare from Auckland Council, are best decided by Aucklanders themselves.
Mr. Heuser highlights the potential of the Local Water Done Well policy to be a major advance in New Zealand’s water services. Castalia looks forward to supporting this proven and adaptable method.
Supercritical geothermal (SCGT) resources have the potential to meet a significant portion of New Zealand’s future energy needs while helping to meet climate policy commitments.
Based on GNS Science’s research, Castalia’s economic analysis found that supercritical geothermal could supply up to 30,000 GWh of electricity per year, at least three times the current output of conventional geothermal. Supercritical geothermal can also deliver the trifecta of low-cost, zero-emissions, and reliable electricity with minimal land requirements. By reinjecting extracted gases underground, SCGT systems could operate essentially as zero-emission plants.
SCGT also offers efficient green heat for industrial uses like dairy processing and wood pellet production for use as low-carbon solid fuel.
Our analysis suggests that grid-connected supercritical geothermal electricity generation could become a reality by 2037. This ambitious timeline requires advancements in research and development (R&D) and strategic policy support in the near term. Castalia’s modeling indicates SCGT could provide either 1365 or 2050 MW of new renewable capacity post-2037, depending on whether thermal generation is permitted. Under a thermal generation permitted scenario, SCGT could make up a substantial portion of new generation capacity even when competing with the lowest-cost wind and solar energy projects.
To achieve the 2037 goal, we recommend policymakers recognize SCGT’s immense potential for affordable decarbonization and consider granting environmental consent for exploratory wells. Proactive collaboration between research institutions, mana whenua and landowners, private sector energy companies, and government agencies is vital to spurring the timely investments in innovation needed to tap into this next-generation renewable resource.
Access the full report here: Economic-Value-of-Supercritical-Geothermal.pdf
UPDATE: The New Zealand Government committed up to $60 million to explore the potential of supercritical geothermal. GNS Science and the Ministry of Business, Innovation & Employment will lead the initiative.
Access our slide deck, presented to GNS Science, mana whenua representatives, private sector investors, and energy experts during the New Zealand Geothermal Workshop: Supercritical-Geothermal-Presentation.pdf
Find more information about the ‘Geothermal: Next Generation‘ project led by GNS Science.
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