Environmental products house of the year: Element Markets

Energy Risk Awards 2022: As the race to decarbonise takes off, veteran environmental products firm is well-placed to help firms to net zero

Angela Schwarz, Element Markets

The implications of the race to decarbonise the global economy are clear, says Angela Schwarz, the chief executive officer of Element Markets. “The shift over the past two years means the market for environmental products is incredibly short.”

Two years ago, she estimates, only 100 or so companies had pledged to make themselves net zero. Now, the figure is in the thousands. She sees a “generational push” from younger people helping to drive those commitments, as well as investors raising the alarm over climate risk and wanting to see the companies in which they invest address their environmental impacts. Given that most of those companies will take decades to decarbonise, they will face intense pressure to use environmental commodities, such as carbon offsets, renewable energy certificates and renewable natural gas (RNG), on their way to net zero.

“Support for the demand side of the market has just exploded,” says Schwarz. She believes her Houston-based firm, which was founded in 2005 and is the 2022 winner of Energy Risk’s Environmental products house of the year award, “is in a unique position to scale up and build out the environmental markets on the supply side to meet the demand that the global push for decarbonisation has created”.

That position has been dramatically enhanced by Element Markets’ merger with Bluesource, a Utah-based environmental markets firm. The combined company will be the largest marketer and originator of carbon and environmental credits in North America, and one of the largest in the world, Schwarz says.

She adds there was “very little overlap” between the two firms. Bluesource has focused more on upstream product development, particularly in the voluntary carbon markets, where it has a sizable, predominantly North American project pipeline that includes more than three million acres of forest under management. Element Markets, meanwhile, has specialised in RNG and environmental product marketing.

“Our go-to-market strategies are quite similar, but the way the two companies built themselves was quite different,” says Schwarz.

Much of Element Markets’ business has been directed at compliance markets in North America, specialising in state and federal transportation fuel credit programmes. The company helps owners of agricultural gas digesters, landfill gas capture projects and municipal wastewater plants generate credits for use by compliance buyers, such as oil refiners. It also helps market the RNG those projects generate.

However, while compliance obligations provide a strong foundation to the RNG market, Element Markets is looking towards greater voluntary uptake by corporate buyers as a source of growth, says Schwarz. “We’ve focused on the compliance market … but we’re expanding our RNG business into the voluntary space.”

We have [a very short window] to price carbon into every aspect of our human existence

Angela Schwarz, Element Markets

“From a corporate standpoint, the majority of Scope 1 emissions can be addressed through power purchase contracts for renewable energy wind and solar,” she explains. “On the next level, thermal loads can only be addressed by either electrification or by purchasing RNG and, for a lot of facilities, electrification is not appropriate.”

One challenge to the uptake of RNG is its substantial price premium over fossil natural gas. While conventional natural gas trades at around $4 a British thermal unit (/Btu), the cheapest RNG is nearer $30/Btu. The RNG with the best carbon intensity score costs over $100/Btu. “When you try to translate that cost, without consideration for the carbon intensity of the RNG into the voluntary space, both corporate budgets and personal households have a very hard time absorbing that premium,” Schwarz says.

Part of the answer is Element Markets’ renewRNG product, which combines RNG and conventional natural gas supply with carbon offsets to address the latter’s climate impact. So, rather than going straight for 100% RNG, the product allows buyers to ‘dial in’ the mix of fossil and renewable natural gas, says Schwarz. “It makes it more accessible from an economic standpoint.”

In the near term, RNG is likely to account for just a fraction of US natural gas demand. Schwarz estimates that, “if we build out everything that’s available today, we can probably cover 15% to 18% of current natural gas used in the US”. But she notes that some states, notably New York and California, are looking to phase out the use of natural gas in new homes and industry, although this will be a multi-year process.

“This all started with the Industrial Revolution,” she says. “We’ve had over 250 years of incredible industrial evolution without appropriately pricing in climate impacts. Now we’ve woken up and realised we have to price carbon in every aspect of our human existence, and we have a very short window to facilitate meaningful change. It’s an incredible undertaking that we need to do globally, and with speed and efficiency.”