Shell injects BRL 200 million into Carbonext (with an eye on CO2 credits)

The transaction gives the startup a boost to enter new business areas and opens the door to new technologies for the oil company, which will have preferential access to the CO2 credits generated

Ten months after raising BRL 30 million with funds to scale up the generation of carbon credits from the preservation of the Amazon, Carbonext is receiving a contribution of BRL 200 million from Shell Brasil, which will become its minority shareholder.

This is the first partial closure of a larger funding round that is underway and is expected to be completed later this year.

“The transition to a low carbon economy is no easy task and partnering with Shell, with access to many resources directed towards this agenda, is a paradigm shift”, says Janaina Dallan, co-CEO of Carbonext.

The company is one of the pioneers in generating carbon credits from the avoided deforestation of the country’s native forest and today has 2 million hectares of projects under development in the Amazon.

The transaction gives the startup a boost to enter new business areas and opens the door to new Shell technologies – such as state-of-the-art satellite forest monitoring –, while granting the Anglo-Dutch oil company preferential access to CO2 credits. that will be generated by Carbonext from now on.

Under the agreement, whenever Carbonext generates new credits, Shell will have exclusivity for three months to buy, at market prices, a slice equivalent to its shareholding (which has not been revealed).

indirect emissions

With a commitment to zero net greenhouse gas emissions from its own operations by 2050, the oil company’s biggest challenge is the so-called indirect emissions, those that occur in its value chain – especially in the use of its products by consumers.

For these, the company has a goal of offsetting 120 million tons of CO2 per year by 2030 via the purchase of carbon credits.

Working with a future scenario of credit scarcity, to guarantee its place in the sun, the oil company has made a series of bets similar to what is now happening at Carbonext.

In March, the company entered into a joint venture in India with EKI Energy to create Amrut Nature Solutions, in which it has 49% of the capital and plans to invest US$ 1.6 billion over the next five years. In 2020, it had already purchased Select Carbon in Australia and a similar move was made in China.

Shell’s rights under the contract are restricted to preference over part of the credits. “Shell will not interfere in the business and will not interfere in our day-to-day activities”, says co-CEO Luciano Corrêa da Fonseca.

broadening the scope

With plans to reach 10 to 15 million hectares of forested areas in the coming years, the resources will be used, according to the executive, to expand the possibilities of developing the bioeconomy in the region.

In addition to extracting açaí – the company has an exclusive contract with the Oakberry chain – and other fruits from the Amazon, another front that is beginning to be developed is ecotourism in preserved areas. In both cases, Fonseca says that there may be opportunities for business acquisitions that are complementary.

The company also has plans to enter into more capital-intensive activities. Among them is the purchase of own land – today, Carbonext develops projects on third-party properties. Another front will be the reforestation of deforested portions within the areas in which it operates. “We will carry out reforestation in a complementary way to preservation”, says Fonseca.

At the end of the day, the strategy is to create, for the same preserved areas, different sources of revenue in addition to CO2 credits.

The company also intends to act in the activity of offsetting legal reserves. According to the forest code, rural producers must preserve a percentage of native forest on their properties, which varies from biome to biome. The idea here is to act as a kind of real estate agent for forest reserves to offer compensation to those who are out of compliance.

From January to May, Carbonext generated 2.5 million carbon credits that were sold at R$150 million in the voluntary market – the company usually keeps 25% to 30% of the revenue generated and the rest goes to the landowner and for the development of areas. The expectation is to generate 10 million credits in the year.

high tech monitoring

Fonseca and Dallan say that Shell’s entry made sense not only because of the financial contribution, but because in 2018 the company created a Nature-Based Solutions (NBS) division that already presents a series of technological solutions that represent a leap forward for Carbonext.

“They are going to open their kitchen and provide technologies”, says Fonseca.

One of the first will be access to the oil company’s high definition satellite images (today Carbonext works with public images, of lower quality) to monitor preserved forests. Shell will also provide an algorithm it developed to identify deforestation spots and generate alerts.

Another technology that Carbonext may use is an E-DNA or “environmental DNA”. Based on water or soil samples from a given area, a DNA reader crosses them with a species bank and it is possible to assemble an inventory of the area’s biodiversity.

From the database assembled, says Dallan, it is possible to follow the evolution and find out if there is a reduction or increase in each of the species, based on the amount of organic material collected.

This type of technology is especially interesting when thinking about ‘premium’ carbon credits, which attest to extra benefits such as the preservation of biodiversity.

Carbonext will also install low-cost CO2 flow measurement towers developed by Shell in its areas and will exchange experiences with the oil company’s traditional community management team.

“All this added up makes the projects increasingly rich, in terms of having information and providing transparency”, says Fonseca.

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About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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