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A new US-listed exchange-traded fund (ETF) that tracks carbon prices in three markets was launched Thursday, allowing retail investors for the first time to indirectly hold cross-continental stakes in cap-and-trade schemes.
Some of the EU’s largest cement and steel producers have seen production rebound late in H1 following initial coronavirus lockdowns in Q1, but they say prospects of a second wave make their outlooks for the rest of the year impossible to predict.
EU utilities advanced their hedging positions over the second quarter, even as their ETS-covered output slumped considerably as coronavirus restrictions took effect, according to financial results published on Thursday.
EUAs fell back below €26 on Thursday, giving back the previous day’s gains as markets sank on worse-than-expected GDP and corporate data, hitting home how badly the pandemic has struck the wider economy.
NZUs have gained almost a dollar over the past two days to climb past NZ$34.00 ($22.53) for the first time, as steady demand and limited supply keep sellers eyeing higher levels.
Coal-fired power generators participating in China’s pilot carbon markets are set to find life easier in the national emissions trading scheme due to more generous allocation, said a report released Thursday.
RGGI allowance (RGA) prices surged to a four-year high on the secondary market this week on increased compliance buying, while California Carbon Allowance (CCA) values slid despite more trading activity.
Pennsylvania Senate Minority Leader Jay Costa (D) on Thursday unveiled a bill to implement a power sector ETS that could link with the RGGI programme, in a rebuttal to other state lawmakers’ attempts to stop Governor Tom Wolf (D) from joining the Northeast US carbon market.
EUAs hit a 14-year high in July before immediately nosediving as the market suffered altitude sickness. Now we’re back in the €25-26s, roughly where we were before the Great Covid Sell-Off, and it feels like prices aren’t sure where to go next. According to Alessandro Vitelli, August looks pretty finely balanced in terms of price outlook: a supply cut may mitigate some potential weakness, but there are darker clouds on the horizon.
In the latest episode of our Carbon Pulse Conservations podcast, we speak with Sheppard Mullin Partner Nico Van Aelstyn about the recent federal court rulings in the US Department of Justice’s (DOJ) legal challenges to the California-Quebec carbon market linkage.
BITE-SIZED UPDATES FROM AROUND THE WORLD
Flooded funds – As much as 20% of global GDP could be threatened by coastal flooding by the end of the century if no action is taken, according to a new report published Thursday in Springer Nature. The research, conducted by scientists at the University of Melbourne, found that by 2100 the impact could reach $14.2 trillion worldwide. Areas in Northwestern Europe, as well as Southeast and East Asia, are the most at risk, with the Northeast US and Northern Australia also likely to be impacted. (CNBC)
Going giga – The European Investment Bank will back the EU’s plans to build its first gigafactory for the manufacturing of lithium-ion battery cells in Sweden with a €350 mln loan, the European Commission announced on Wednesday. The battery factory, led by Northvolt, will be located in Skelleftea, a region home to a prominent raw material and mining cluster which has a long history of process manufacturing and recycling. The installation will produce 16 GWh of battery capacity per year in its initial phase, to be scaled up at a later stage to potentially as much as 40 GWh.
Resilient wind – The installation of new EU wind farms over the first half of 2020 remained comparable to previous years despite the effects of the pandemic, and generation broke record levels, according to trade association WindEurope. On land, 3.9 GW in turbines were built in the first semester of 2020, compared to an average of 3.7 GW over the last three years. Only offshore wind construction dipped slightly with 1.2 GW installed in the first half compared to 1.9 GW in 2019 and a three-year average of 1.5 GW. That comes despite the fact that construction was disrupted in January and February as a result of supply chain disruptions in Asia, as well as restrictions within EU nations that affected the movements of workers and equipment. (Euractiv)
Resurrected – Even before the country’s coal phaseout law enters into force, Germany’s Economy Minister Peter Altmaier is facing legal headwinds. The Essen-based coal-fired power plant operator Steag on Wednesday submitted an urgent application to the Federal Constitutional Court against the controversial law. Steag, which is partly owned by the local authority, sees its hard coal-fired power plants as being significantly disadvantaged compared to operators of lignite-fired power plants. Steag wants the amounts of electricity tendered during the exit increased in favour of hard coal, with higher prices for each megawatt of decommissioned hard coal capacity, though the company expressly does not attack the goals of the Coal Exit Act and the CO2 quantities agreed therein. The last coal-fired power plant in Germany is to be shut down in 2038, and Altmaier had hoped to have finally resolved the long-standing dispute over a socially acceptable exit from coal power generation by presenting the law a few weeks ago. (Der Spiegel)
Total loss – French energy giant Total is writing off C$9.3 bln ($7 bln) worth of stranded oil assets in Alberta and cancelling its membership in the Calgary-based Canadian Association of Petroleum Producers (CAPP). Total now considers oil reserves with high production costs that are to be produced more than 20 years in the future to be “stranded” given its carbon reduction targets and because the resource may not be extracted by 2050, the Paris-based company said Wednesday. It will take writedowns worth C$7.3 bln related to its 24.6% ownership in the Fort Hills oil sands mine operated by partner Suncor Energy, and its 50% stake in the Surmont thermal oil sands project operated by partner ConocoPhillips. Additionally, the company said it is leaving CAPP because of a “misalignment” between the fossil fuel trade organisation’s public positions and those expressed in Total’s climate ambition statement announced in May. (Globe and Mail)
Pension pushback – US House Democrats, investors, and state pension fund operators are pushing back against a proposal from President Donald Trump’s administration guiding how pension fund managers can pursue sustainable investments, saying it could expose retirees to shrinking nest eggs as climate change worsens. The Department of Labor’s proposal would forbid pension fund managers from allowing ESG factors to tip the balance in deciding how to invest employee retirement funds. Labor Secretary Eugene Scalia believes some fund managers are using ESG as a means of virtue signalling that threatens investor returns, while opponents of the proposal contend that the measures narrowly defines risks, restricting fund managers from weighing how climate change, human rights, and other issues negatively affect portfolio performance. A group of 21 House Democrats called Labor’s proposal a “solution in search of a problem,” given that ESG funds have generally fared no worse and often better than competing funds and stock indices. (Politico)
Bank buds – Bank of America and Citi separately announced Wednesday they’re joining the Partnership for Carbon Accounting, a global consortium of financial companies that agrees to count GHG emissions stemming from their investments. The banks’ move follows fellow US-based institution Morgan Stanley joining the partnership earlier this month. (Axios)
Renewable replacement – New Mexico regulators on Wednesday unanimously approved a plan to add renewable energy and storage to replace a portion of the San Juan Generating Station’s coal capacity owned by Public Service Company of New Mexico (PNM). The portfolio includes 650 MW of new solar resources and 300 MW of battery storage, totalling over $1 bln in investments within the districts impacted by the San Juan plant closure. PNM, the state’s largest utility and majority owner of the San Juan plant, had recommended a “hybrid” replacement scenario that would have allowed the utility to add 280 MW of gas-fired power alongside wind, solar, and battery storage to replace its 497 MW retail share of the plant. (Utility Dive)
And finally… Lube up – UK-based Silverstream Technologies has signed a framework agreement to retrofit an unspecified number of LNG carriers in oil major Shell’s fleet with air lubrication systems as a means of reducing fuel consumption and lowering emissions. The deal will see the Shell International Trading and Shipping Co and Silverstream develop a close working relationship to design, engineer, procure, and execute the the latter’s system. Based on in-operation trials, Silverstream Technologies said its system reduces fuel consumption and associated GHG emissions by 5-10%, depending on the vessel’s operational profile. (LNG Industry)
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