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A growing number of European lawmakers are considering measures to curb speculation or cap prices in the EU ETS, Carbon Pulse has learned, as allowances skyrocket towards all-time highs on what some participants say are attempts by hedge funds and other algo-wielding investors to “corner” the market.
EUAs fell back below €29 on Thursday, maintaining distance from this week’s year-high as news that lawmakers were considering measures to curb the market’s volatility or limit speculative activity spooked some traders.
Free allocation of EUAs for energy-intensive industries has prevented these sectors from enabling the technological innovations needed for their decarbonisation and therefore should be reconsidered, an advisor to a Europe-wide industry trade union said on Thursday.
The European Commission on Thursday adopted rules for the operation of the bloc’s Modernisation Fund, an ETS-funded financing instrument supporting mainly Eastern EU nations to upgrade their energy systems.
EU carbon traders have found humour in a pair of fake tweets that have been circulating in the market over the past week or so, though some voiced unease at the possibility that they were genuine attempts to influence EUA prices.
South Korea’s ETS prices collapsed nearly 10% on Thursday to their lowest levels since Jan. 2019, with support disappearing as industrials continued to dump surplus KAUs they normally would have banked.
Rio Tinto is preparing to shut down New Zealand’s only aluminium smelter next year amid high energy costs and a poor industry outlook, it said on Thursday, a move that paused the rapid rise in NZ carbon prices as traders digested the prospect of the nation’s biggest electricity consumer closing.
California Carbon Allowance (CCA) prices rose to a nearly six-week high this week despite continued expectations that future quarterly sales will go undersubscribed, while RGGI Allowances (RGAs) stagnated above the 2021 Emissions Containment Reserve (ECR) trigger price.
The County of San Diego’s Board of Supervisors voted this week against challenging a court ruling that banned a voluntary offset programme for rural housing developments, leaving the jurisdiction to forge a new plan.
A New York-based hedge fund opened a new CO2 Allowance Tracking System (COATS) account in the Northeast US RGGI market this week amid rising prices in the power sector ETS, data shows.
The absence of corresponding adjustments on voluntary carbon credit transfers over the next decade risks double counting emission reductions and obscuring climate mitigation progress, environmental organisations argued Thursday.
BITE-SIZED UPDATES FROM AROUND THE WORLD
Toe-dipping to 1.5 – Global temperatures will continue to warm over the next five years and may even temporarily rise to more than 1.5C above pre-industrial levels, the World Meteorological Organization (WMO) said Thursday. That does not mean the world would be crossing the long-term warming threshold of 1.5C, which scientists have set as the ceiling for avoiding catastrophic climate change. But it does show the warming trend continuing apace, underlining the “enormous challenge” the world faces in meeting the Paris Agreement’s goal of curbing climate-warming emissions enough to keep the rise in temperatures “well below” 2C, said WMO Secretary-General Petteri Taalas. (Reuters)
Negligent neighbour – The UK government promised a green economic recovery but so far it has fallen far short of what its European neighbours are offering, according to BNEF calculations. The UK’s green stimulus equates to $101 per person. By comparison, France’s package comes in at $292 per head, Germany’s at $389, and Denmark will spend $776 per person. In his speech on Wednesday, Chancellor of the Exchequer Rishi Sunak said further stimulus measures aimed at rebuilding the economy would be announced in a fall budget later this year. (Bloomberg Green)
Bunkers on the books? – International aviation and shipping emissions are likely to be included in the UK government’s net zero target, it has emerged – but not until after 2023. The intention to review carbon accounting emerged after ministers and advisers, including climate activists, held the first meeting of the Department for Transport’s (DfT) net zero board. The board includes representatives from business, technology, motor manufacturers and the transport industry, as well as campaigners, including a founder of Plane Stupid and a director of the International Council on Clean Transportation, which uncovered the VW diesel scandal. The DfT is understood to be considering the advice of the Committee on Climate Change, which last month again urged the government to include all such emissions in its targets. The DfT’s decarbonisation plan is expected to call for a change in policy, but only once the government has attempted to secure internationally binding reductions in emissions through the International Maritime Organisation, whose strategy will not be settled until 2023. (The Guardian)
Spanish drop – Spain’s CO2 emissions fell by 6.2% in 2019 to 313.5 Mt, according to preliminary data from the Ministry for Ecological Transition and Demographic Challenge. The figures show that transport remains, as in previous years, the biggest emitting sector, amounting to 29% of CO2 emissions, followed by industry (20.6%), power generation (13.5%), crop and livestock farming (12.5%), the consumption of fuels in the residential, commercial, and institutional sectors (8.8%), and waste (4.3%). (Eurasia Review)
Teenage sage – EU Commission Vice-President Timmermans, in charge of the European Green Deal, has appointed three special advisors, including 19-year-old climate activist Adelaide Charlier – one of the leaders of the youth climate marches in Belgium. Her role is “to give the perspective of youngsters on Green Deal and Climate policies”, according the Commission description. Special advisors work on a short term basis, for a limited number of days per year, and may or may not be remunerated. (European Commission)
Eighteen and up – US emissions dropped 18% from March 15 to June 15 because of the coronavirus pandemic, according to researchers at Rhodium Group. The analysis found GHGs will likely be 6-12% below pre-COVID projections through the end of the year, amounting to “the largest annual drop in GHG emissions in recorded history.” Through 2030, emissions could fall 2-12% relative to the pre-pandemic baseline. However, Rhodium noted the high economic costs associated with this spring’s reduction in emissions, which it estimated at between $3,200 and $5,400 in lost economic activity per ton of CO2 reduced, depending on the speed of the nation’s economic recovery. (Politico)
Bankrolled – US non-profit Rocky Mountain Institute (RMI) is launching The Centre for Climate-Aligned Finance supported by Wells Fargo, Goldman Sachs, Bank of America, and JPMorgan Chase. Among other things, the centre will try to help fossil-fuel companies and other carbon-intensive sectors aggressively cut emissions with the input of banks and shareholders. However, it is unclear how much money the banks are putting towards the initiative, and during a press call Wednesday, no bank officials said explicitly that they would change their lending and investment practices based on the initiative. All of the banks backing this new initiative finance billions of dollars worth of fossil fuel projects a year, per data compiled by the Rainforest Action Network. (Axios)
Backing up – The Japanese government on Thursday said it will tighten state-backed financing criteria for overseas coal-fired power plants after facing criticism over its support for the fuel. The move marks a partial shift away from Japan’s strong official backing for coal but includes exemptions, leaving some non-governmental organisations sceptical about how much impact the new approach will have. “As a principle, the government will not provide assistance for new coal projects to those countries where Japan is not fully aware of the local energy situation and challenges or policies for decarbonisation,” the government said in a statement. It has received criticism from many quarters over its support, usually through Japan’s export credit agency, for the construction of coal-fired plants in countries such as Indonesia and Vietnam, as well as new plants at home. (Reuters)
Super Cuts – Australia’s second-largest pension fund aims to almost halve carbon emissions across its investments within a decade as it joins global peers in mitigating the risks of climate change. First State Super said it will advocate for Australia’s economy to reduce its GHG emissions by 45% by 2030 and replicate the target in its portfolio. The A$120 bln ($83 bln) fund will reduce emissions in its stock holdings by 30% by 2023, has divested from thermal coal producers, and continues to review its energy portfolio to avoid owning so-called stranded assets. The action plan comes after months of pressure on Australia’s pension funds – custodians of the world’s fourth-largest pot of retirement savings at A$2.7 trillion – to follow firms like BlackRock and Europe’s Stichting Pensioenfonds ABP in cutting exposure to high-emitting companies. Those calls gained traction after the nation’s deadly wildfires heightened concerns about the impact of climate change. First State Super aims to incorporate a “shadow” carbon price on all its applicable assets and investments. (Bloomberg)
And finally… To dust we shall return – Spreading rock dust on cropland around the world could save around a tenth of humanity’s “carbon budget”, the amount of CO2 humans can afford to emit without triggering catastrophic levels of global warming. Earth’s three biggest CO2 emitters – China, the US, and India – have the most to gain from the strategy, which is known as enhanced rock weathering (ERW). Rocks naturally absorb CO2, but ERW accelerates the process by grinding them up to increase their surface area. David Beerling at the University of Sheffield in the UK says his team’s modelling of ERW’s potential is the most realistic yet because it limits how much rock is available and the energy countries would be willing to use for grinding. Factoring in countries’ climate, cropland area and evolving energy systems, they found that rock dust could remove between 0.5 and 2 bln tonnes of CO2 annually by 2050. In contrast, humanity’s fossil fuel use emits around 35 bln tonnes of CO2 each year. (NewScientist)
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