How might emissions trading schemes develop and can they help with the transition to Net Zero? What are the implications for Bowman, and how could our eTurbo Systems play a part? Here, our CEO, Paul Dowman-Tucker, outlines his thoughts on this complex topic.
Back in December 2021 (which, given current events, feels like it was a very long time ago), I wrote about some of the key things that grabbed my attention during COP26 in November. One of these was that emissions trading is really starting to come back to the fore and that it would be a key driver for progress towards Net Zero. Since then, I have been investing time into understanding the structure and mechanisms in the emissions trading space.
As a company developing and producing technologies that reduce greenhouse gas emissions of combustion engines, it is obviously of interest to know how we might incorporate the benefit of this reduction in emissions directly into the customer value proposition in quantitative, financial terms. While relatively simple from a fuel-saving viewpoint, it is harder than you might think from an emissions trading perspective, which is a little ironic given the whole purpose of such schemes is to incentivise the reduction of emissions and progress to Net Zero.
Stepping back a bit, at the level of the consumer, it is quite simple to understand the valuation of carbon emissions in financial terms. There are many companies selling carbon offsets, and, for example, you can tick a box when you book plane tickets and pay to offset the emissions incurred by your share of that flight. While care needs to be taken to select a legitimate scheme, when you do the money you pay goes to fund a carbon-negative activity, or other accredited sustainable activity.
When it comes to selling a product that delivers an emissions reduction benefit to the owner/operator of that product, things become more difficult. On one hand, it is acknowledged that enabling a combustion engine to reduce its emissions when burning fossil fuels is far from an emissions-negative outcome. But on the other hand, if the combustion engine needs to be run (we cannot simply turn off all fossil-fuelled combustion engines without dire consequences for society), then it is certainly better to reduce the level of emissions as far as possible. (I would like to remind the reader that while, more broadly, Bowman’s eTurbo Systems technology enables combustion engines to transition to zero-carbon fuels, that transition is realistically not an instantaneous one). So on the basis that Bowman eTurbo Systems technology is reducing the magnitude of a necessary emission, it would not be appropriate to sell that emissions benefit to the carbon offsetting market. But the saving should accrue a financial benefit to the owner/operator of the engine, even if for no other reason than to incentivise them to use technology to reduce emissions.
The only way (at least that I have uncovered to date) that Bowman eTurbo Systems can directly ‘credit’ the emissions reductions it delivers to our customers’ benefit, is under the UK and EU Emissions Trading Schemes (ETS). These are somewhat limited in scope, and only require certain industries to pay for their carbon emissions (basically where fuel is used for combustion, but only where the input is over 20MW thermal, and the aviation industry). But this does include power generation and so there is an opportunity for larger sites with multiple engines (powering generators) to benefit. The 20MW thermal input threshold may also change in 2026, when the scheme goes into its next phase, encompassing significantly more operators.
The carbon pricing in the ETS is currently seeing something of a surge in line with both fuel and electricity prices. At the time of writing, it stands at over £70/tonne, which is beyond the threshold at which the regulator may intervene to help alleviate the price if it so chooses, and considerably higher than the £22/tonne price floor in the scheme. At this price, we are definitely into the territory where it becomes economically very appealing to alleviate emissions (which, again, is the purpose of such schemes). For example, fitting Bowman’s eTurbine to a 1MW diesel engine running continuously would save ~>200 tonnes of CO2 per year, which, when this carbon saving is priced as part of an ETS, improves the payback period based on fuel savings alone by almost 20% (putting the payback period at well under a year).
Carbon trading has now been around for decades, but it has yet to really realise its potential impact in driving us down the path to Net Zero. The ETS schemes are a good start, and the high price of carbon on the markets currently helps a good deal. Only time will tell if this financial pressure and subsequent opportunity will improve investments into technologies that reduce emissions, but the potential for this to happen is there. Now that countries are starting to commit to Net Zero timescales – the UK, for example, having enshrined its 2050 commitment in law – we may start to see more global coordination and movement, and tangible progress towards the Net Zero goals we all want to achieve.
How might emissions trading schemes develop and can they help with the transition to Net Zero? What are the implications for Bowman, and how could our eTurbo Systems play a part? Here, our CEO, Paul Dowman-Tucker, outlines his thoughts on this complex topic.
Back in December 2021 (which, given current events, feels like it was a very long time ago), I wrote about some of the key things that grabbed my attention during COP26 in November. One of these was that emissions trading is really starting to come back to the fore and that it would be a key driver for progress towards Net Zero. Since then, I have been investing time into understanding the structure and mechanisms in the emissions trading space.
As a company developing and producing technologies that reduce greenhouse gas emissions of combustion engines, it is obviously of interest to know how we might incorporate the benefit of this reduction in emissions directly into the customer value proposition in quantitative, financial terms. While relatively simple from a fuel-saving viewpoint, it is harder than you might think from an emissions trading perspective, which is a little ironic given the whole purpose of such schemes is to incentivise the reduction of emissions and progress to Net Zero.
Stepping back a bit, at the level of the consumer, it is quite simple to understand the valuation of carbon emissions in financial terms. There are many companies selling carbon offsets, and, for example, you can tick a box when you book plane tickets and pay to offset the emissions incurred by your share of that flight. While care needs to be taken to select a legitimate scheme, when you do the money you pay goes to fund a carbon-negative activity, or other accredited sustainable activity.
When it comes to selling a product that delivers an emissions reduction benefit to the owner/operator of that product, things become more difficult. On one hand, it is acknowledged that enabling a combustion engine to reduce its emissions when burning fossil fuels is far from an emissions-negative outcome. But on the other hand, if the combustion engine needs to be run (we cannot simply turn off all fossil-fuelled combustion engines without dire consequences for society), then it is certainly better to reduce the level of emissions as far as possible. (I would like to remind the reader that while, more broadly, Bowman’s eTurbo Systems technology enables combustion engines to transition to zero-carbon fuels, that transition is realistically not an instantaneous one). So on the basis that Bowman eTurbo Systems technology is reducing the magnitude of a necessary emission, it would not be appropriate to sell that emissions benefit to the carbon offsetting market. But the saving should accrue a financial benefit to the owner/operator of the engine, even if for no other reason than to incentivise them to use technology to reduce emissions.
The only way (at least that I have uncovered to date) that Bowman eTurbo Systems can directly ‘credit’ the emissions reductions it delivers to our customers’ benefit, is under the UK and EU Emissions Trading Schemes (ETS). These are somewhat limited in scope, and only require certain industries to pay for their carbon emissions (basically where fuel is used for combustion, but only where the input is over 20MW thermal, and the aviation industry). But this does include power generation and so there is an opportunity for larger sites with multiple engines (powering generators) to benefit. The 20MW thermal input threshold may also change in 2026, when the scheme goes into its next phase, encompassing significantly more operators.
The carbon pricing in the ETS is currently seeing something of a surge in line with both fuel and electricity prices. At the time of writing, it stands at over £70/tonne, which is beyond the threshold at which the regulator may intervene to help alleviate the price if it so chooses, and considerably higher than the £22/tonne price floor in the scheme. At this price, we are definitely into the territory where it becomes economically very appealing to alleviate emissions (which, again, is the purpose of such schemes). For example, fitting Bowman’s eTurbine to a 1MW diesel engine running continuously would save ~>200 tonnes of CO2 per year, which, when this carbon saving is priced as part of an ETS, improves the payback period based on fuel savings alone by almost 20% (putting the payback period at well under a year).
Carbon trading has now been around for decades, but it has yet to really realise its potential impact in driving us down the path to Net Zero. The ETS schemes are a good start, and the high price of carbon on the markets currently helps a good deal. Only time will tell if this financial pressure and subsequent opportunity will improve investments into technologies that reduce emissions, but the potential for this to happen is there. Now that countries are starting to commit to Net Zero timescales – the UK, for example, having enshrined its 2050 commitment in law – we may start to see more global coordination and movement, and tangible progress towards the Net Zero goals we all want to achieve.
How might emissions trading schemes develop and can they help with the transition to Net Zero? What are the implications for Bowman, and how could our eTurbo Systems play a part? Here, our CEO, Paul Dowman-Tucker, outlines his thoughts on this complex topic.
Back in December 2021 (which, given current events, feels like it was a very long time ago), I wrote about some of the key things that grabbed my attention during COP26 in November. One of these was that emissions trading is really starting to come back to the fore and that it would be a key driver for progress towards Net Zero. Since then, I have been investing time into understanding the structure and mechanisms in the emissions trading space.
As a company developing and producing technologies that reduce greenhouse gas emissions of combustion engines, it is obviously of interest to know how we might incorporate the benefit of this reduction in emissions directly into the customer value proposition in quantitative, financial terms. While relatively simple from a fuel-saving viewpoint, it is harder than you might think from an emissions trading perspective, which is a little ironic given the whole purpose of such schemes is to incentivise the reduction of emissions and progress to Net Zero.
Stepping back a bit, at the level of the consumer, it is quite simple to understand the valuation of carbon emissions in financial terms. There are many companies selling carbon offsets, and, for example, you can tick a box when you book plane tickets and pay to offset the emissions incurred by your share of that flight. While care needs to be taken to select a legitimate scheme, when you do the money you pay goes to fund a carbon-negative activity, or other accredited sustainable activity.
When it comes to selling a product that delivers an emissions reduction benefit to the owner/operator of that product, things become more difficult. On one hand, it is acknowledged that enabling a combustion engine to reduce its emissions when burning fossil fuels is far from an emissions-negative outcome. But on the other hand, if the combustion engine needs to be run (we cannot simply turn off all fossil-fuelled combustion engines without dire consequences for society), then it is certainly better to reduce the level of emissions as far as possible. (I would like to remind the reader that while, more broadly, Bowman’s eTurbo Systems technology enables combustion engines to transition to zero-carbon fuels, that transition is realistically not an instantaneous one). So on the basis that Bowman eTurbo Systems technology is reducing the magnitude of a necessary emission, it would not be appropriate to sell that emissions benefit to the carbon offsetting market. But the saving should accrue a financial benefit to the owner/operator of the engine, even if for no other reason than to incentivise them to use technology to reduce emissions.
The only way (at least that I have uncovered to date) that Bowman eTurbo Systems can directly ‘credit’ the emissions reductions it delivers to our customers’ benefit, is under the UK and EU Emissions Trading Schemes (ETS). These are somewhat limited in scope, and only require certain industries to pay for their carbon emissions (basically where fuel is used for combustion, but only where the input is over 20MW thermal, and the aviation industry). But this does include power generation and so there is an opportunity for larger sites with multiple engines (powering generators) to benefit. The 20MW thermal input threshold may also change in 2026, when the scheme goes into its next phase, encompassing significantly more operators.
The carbon pricing in the ETS is currently seeing something of a surge in line with both fuel and electricity prices. At the time of writing, it stands at over £70/tonne, which is beyond the threshold at which the regulator may intervene to help alleviate the price if it so chooses, and considerably higher than the £22/tonne price floor in the scheme. At this price, we are definitely into the territory where it becomes economically very appealing to alleviate emissions (which, again, is the purpose of such schemes). For example, fitting Bowman’s eTurbine to a 1MW diesel engine running continuously would save ~>200 tonnes of CO2 per year, which, when this carbon saving is priced as part of an ETS, improves the payback period based on fuel savings alone by almost 20% (putting the payback period at well under a year).
Carbon trading has now been around for decades, but it has yet to really realise its potential impact in driving us down the path to Net Zero. The ETS schemes are a good start, and the high price of carbon on the markets currently helps a good deal. Only time will tell if this financial pressure and subsequent opportunity will improve investments into technologies that reduce emissions, but the potential for this to happen is there. Now that countries are starting to commit to Net Zero timescales – the UK, for example, having enshrined its 2050 commitment in law – we may start to see more global coordination and movement, and tangible progress towards the Net Zero goals we all want to achieve.