Owners of electric vehicle charging stations will have a fresh source of revenue in 2019 as a coalition of major energy companies, charging network developers, cities and investors unveiled plans Tuesday to tap an emerging market for tradable carbon credits derived from slashing transportation-sector emissions.

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Underpinning these EV charging credits is a new method for calculating emissions reductions developed by the Climate Neutral Business Network, an Oregon-based advisory firm, together with third-party carbon credit certification group Verra and the Electric Vehicle Charging Carbon Coalition -- a group founded by the Carbon Neutral Cities Alliance, Connecticut Green Bank, Volkswagen AG subsidiary Electrify America, EVgo Services, Exelon and Siemens to launch EV charging-based carbon credits.

Exelon, Electrify America and EVgo plan to kick off sales of certified credits from their charging stations in the voluntary carbon market in 2019, while the Connecticut Green Bank plans to aggregate carbon credits from chargers in Connecticut.

The new revenue stream could help operators of EV charging stations develop more sustainable business models to keep pace with an expected boom in electric vehicle sales in coming years. In addition to generating additional income, backers of EV charging credits see the voluntary carbon market as a way to accelerate electric transportation, expand fast-charging networks and reduce emissions from a sector that is lagging recent progress in the power industry.

"This is the way to open the door to the carbon capital markets," Climate Neutral Business Network CEO Sue Hall said in an interview. "It's an important step forward." Carbon credit sales could deliver returns on capital investments for charging infrastructure in the range of 5% to 10%, Hall said, depending on demand and pricing for carbon credits, and utilization rates of EV charging stations.

"The carbon business case is really quite compelling here," said Bert Hunter, chief investment officer at the Connecticut Green Bank. "As the value increases, it could be a substantial revenue stream that could help transit districts finance the purchase of battery electric buses. They are on the road for 10, 12 hours a day or more. When you have a use case like that, that is very intensive, you are displacing massive amounts of carbon."

'CHICKEN-AND-EGG EQUATION'

Electrify America, which is investing $2 billion into electric vehicle charging across the US, views carbon credits as "just one more thing to the bottom line that makes [EV charging infrastructure] a viable investment," said Wayne Killen, the company's director for charging infrastructure planning and business development. "Frankly, up until this point, it has been more challenging because the economics are not as strong in a low-utilization environment."

Selling carbon credits in the voluntary market could help Electrify America recover the costs of developing its nascent network of public fast-charging stations, which are capital intensive but could enable a new level of transportation electrification through refueling times that are similar to fossil fuel vehicles. "In the chicken-and-egg equation, chargers need to be there first before consumers will overcome anxiety about the charging infrastructure being adequate."

Electric power generator and distributor Exelon plans to first pilot the sale of carbon credits from charging stations it operates at its own facilities in 2019 but sees multiple opportunities for EV charging credits as the business model evolves. The company, whose six utility territories serve roughly 10 million customers across several Midwest, Northeast and mid-Atlantic states, is eyeing EV charging credits to reduce investments for utility-owned infrastructure it is proposing, said Suzanna Mora, Exelon's director of utility initiatives. Exelon is also exploring ways "to enable our customers to get value out of charging credits from charging they do at home," Mora said.

"We've created a standard that allows us to account for the collective benefit of many individual transactions across many regions, and diverse customers and technologies," Bill Brady, Exelon's director of corporate environmental strategy, said in an interview. But that is just a starting point. "We would like to see a mandatory market, and we think that establishing a price on carbon emissions through voluntary offsets is a step in the right direction."

Ultimately, EV charging credits could become "a game-changer for carbon markets, and a crowd-pleaser for EV drivers everywhere," Jessie Denver, energy program manager at the San Francisco Department of the Environment, said in a news release. San Francisco is a member of the Carbon Neutral Cities Alliance, which seeks to cut greenhouse gas emissions at least 80% by 2050. Berlin, Germany; Boston; Copenhagen; London; New York; Oslo; Seattle; Toronto; Vancouver, Canada; and Washington, DC, are among the other member cities backing the launch of EV charging-based carbon credits.

-- Garrett Hering, S&P Global Market Intelligence, newsdesk@spglobal.com

-- Edited by Gail Roberts, newsdesk@spglobal.com