News & Insights

Most companies want to decarbonize their product lines and operations, whether because of smart risk management, shareholder pressure, or regulatory mandates. But decarbonizing is often expensive, with slower returns on investment, in part because of regulatory volatility. This has prompted many enterprises to struggle to find the “right” timing for decarbonization investments. Early movers risk becoming less competitive because of higher costs, while laggards can face supply chain disruptions and higher costs from waiting too long.

This is where book and claim can play a critical role, helping companies manage and potentially cut the cost of decarbonizing, making an investment in sustainability more likely to succeed. It achieves this by creating a new revenue stream from the sale of tradable, verifiable sustainability claims that come from the unbundling of sustainability attributes from the physical product without requiring costly supply chain segregation. Ultimately, book and claim can help producers monetize decarbonization investments early, accelerate the scaling of low-carbon products by subsidizing their premiums, and enable flexible participation for downstream buyers. 

While lots of companies are considering book and claim, many are uncertain where to start — with some even considering waiting for regulation to force them to adopt it. But there are benefits for industries from developing voluntary markets now. Among the biggest: providing regulators with the kind of information that will help them create better rules and ease future regulatory implementation. 

In a nascent market, voluntary book and claim mechanisms also channel capital toward low-carbon products and develop market infrastructure that will eventually be necessary with mandates. Longer-term benefits include building registries, data standards, and measurement protocols that regulators may eventually adopt. All this helps ensure a smooth transition with minimal market disruption.

Diesel shows the problems when regulation leads market development

To illustrate the potential risks if industry allows regulation to lead market development instead of moving ahead with voluntary markets such as book and claim, consider the experience of the US diesel market. In the early 2000s, the Environmental Protection Agency introduced mandates to use ultra-low-sulfur diesel, with sulfur content of 15 parts per million rather than the more conventional 500. Refinery supply and logistics weren’t prepared for such a dramatic cut, and diesel prices spiked with speculators and traders capitalizing on the arbitrage created.

We also saw this kind of disruption in renewable fuels, when step changes in regulation caused spikes in the price of biofuels or associated credits. In the late 2010s, for instance, increasing targets in California’s Low-Carbon Fuel Standard sent prices of credits above $200 per ton of carbon dioxide equivalent when historically they typically priced under $100. Developing voluntary systems for book and claim could provide platforms for market forces to align supply and demand before regulators step in and reduce the volatility of regulatory implementation.

Developing voluntary systems for book and claim could provide platforms for market forces to align supply and demand before regulators step in and reduce the volatility of regulatory implementation.

The beginnings of book and claim in sustainable aviation fuel

Take sustainable aviation fuel (SAF). In 2023, the European Union passed regulations mandating that aviation fuel suppliers provide European airports with a fuel blend including a minimum of 2% SAF by 2025. Historically, such a quick turnaround on a mandate might cause market prices for SAF to spike, with producers waiting for the rule to take effect before bringing capacity to market. 

Instead, sufficient SAF capacity had already come to market by 2025, in part because of the voluntary book and claim market that developed, which has enabled a much smoother start to the SAF mandate. The minimum ramps up to 6% in 2030, and the voluntary book and claim market will have to expand with it to ensure supply-demand balance.