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ANALYSIS: Federal recognition of Ontario large emitter programme complicates Canadian offset outlook
Canadian carbon credit demand could skew lower following Ottawa’s approval of the Ontario Emissions Performance Standard (EPS) to replace the federal ‘backstop’ output-based pricing system (OBPS), while the decision may also erode support for the national offset programme under development, market stakeholders told Carbon Pulse.
Trio of investment bank research reports predict much higher EU carbon prices in coming years
EU carbon allowance prices are forecast to rise significantly over the next few years, according to a trio of investment bank research reports released this week, adding to the growing chorus of bullish outlooks for the commodity.
Carbon border adjustments “preferred” option but free EUAs may still be granted -senior EU official
The European Commission prefers a carbon border adjustment mechanism (CBAM) over giving EU Allowances freely to energy-intensive industries, the EU climate chief’s head of cabinet said on Tuesday, adding that the bloc would likely maintain a lower number of free permits.
EU Market: EUAs sink towards €25 after further auction struggle
EUAs slumped towards €25 early on Tuesday, extending an eight-week low on another weak auction and heightened fears about a resumption of more drastic coronavirus lockdown measures.
Huge CO2 cuts needed promptly to hit net zero emissions by 2050 -IEA
Global CO2 emissions must be reduced by around 45% over the next decade compared to a business-as-usual scenario to put the world on track to achieving net zero emissions by mid-century, according to the IEA.
Greater US inflation rate pushes 2021 California carbon allowance floor price forecast up again
California’s carbon market floor price expectations inched higher for the fourth consecutive month as federal data showed US inflation continued its upward trend after the onset of the COVID-19 pandemic.
California’s revised post-2020 carbon allowance reserve tiers not accounted for in WCI data
California’s amended post-2020 allowance reserve tiers are not currently incorporated in the WCI cap-and-trade programme’s Compliance Instrument Tracking Service System (CITSS), meaning some carbon permits currently sitting in jurisdictional accounts will be moved in subsequent quarters, state regulator ARB confirmed.
Upping Australia’s climate target would unlock vast investment potential, boost offset outlook -report
Australia setting a climate target in line with the Paris Agreement would create A$63 billion ($45.3 bln) worth of investment opportunities by 2025, with more than half of that tied to carbon sequestration and the offset market, according to a report released Monday.
BITE-SIZED UPDATES FROM AROUND THE WORLD
Twenty-seven club – EU leaders will on Thursday night hold an “orientation debate” to increase the EU’s 2030 climate target, European Council President Charles Michel told the 27 heads of government in an invitation letter sent on Tuesday. “I would like us to have a constructive debate on the issue, so as to pave the way for an agreement by the end of the year,” Michel said. The Council is therefore unlikely to make a decision on a higher level of ambition until December. More than half of member states support a 2030 target of at least 55% below 1990 levels, as the European Commission has proposed, with Estonia being the latest member state to come on board. Yet EU leaders will need a unanimous decision to set the new climate objective. Read Carbon Pulse’s latest briefing on the 2030 climate target.
Keep ’em out – The European Parliament’s ENVI committee on Monday voted to exclude coal, oil, and gas from the EU’s €672.5 bln Recovery and Resilience Facility – the biggest portion of the bloc’s coronavirus recovery effort. ENVI’s opinion on the RRF, drafted by committee chair Pascal Canfin, was adopted by a 62-15 margin. The vote will be taken into account by the Parliament’s economy and budget committees, which are responsible for drafting the assembly’s final position. ENVI lawmakers also voted to require carbon-intensive companies receiving support from the recovery fund to establish transition plans to decarbonise in line with the Paris Agreement. “European citizens want a fair and green economic recovery, and fossil fuels simply have no place in it. MEPs in the ECON and BUDG committees must follow suit,” WWF’s Sebastien Godinot said.
Portfolio change – Thirty of the world’s largest asset owners, with portfolios worth a combined $5 trillion, have committed to cutting CO2 emissions linked to companies they invest in by up to 29% within the next four years. Members of the UN-backed Net-Zero Asset Owner Alliance – which includes Aviva, the Church of England and the $400-bln California Public Employees’ Retirement System (CalPERS) fund – will each set decarbonisation targets for 2025 as part of wider efforts to align their portfolios with the Paris climate goals and achieve net zero emissions by 2050. Members will reduce emissions linked to their portfolio companies by between 16% and 29% below 2019 levels, identify the top 20 companies responsible for the bulk of their portfolio GHGs, and set goals for slashing emissions in key sectors including oil and gas, utilities, transport, and steel. (Guardian)
Pricey prospects – A report published by SOAS, the Asian Development Bank Institute, Four Twenty Seven, and WWF Singapore has examined the extent to which climate risks can amplify sovereign risk and harm macro financial stability. Analysing a sample of 40 developed and emerging economies, the researchers concluded that higher climate risk vulnerability leads to significant increases in the cost of sovereign borrowing. Identified risks range from the direct fiscal impacts of climate-related natural disasters and adaptation and mitigation programmes to the more indirect impacts climate change can have on trade, capital flows, and a region’s political stability. The report also highlights the negative impacts climate-related risks can have on the stability of a country’s financial sector. (BusinessGreen)
Traders wanna trade – The European Federation of Energy Traders (EFET) “firmly believes” that a well-functioning UK carbon market linked to the EU ETS from the outset constitutes the most cost-effective means of achieving the UK’s target for net zero carbon emissions by 2050. A UK ETS connected to the EU ETS from Jan. 2021 enables UK installations to continue to benefit from the wider, liquid market in EU Allowances and to better manage their business risks, the organisation said in a statement released Monday. A standalone UK ETS or a carbon tax would not deliver these benefits and would bring a number of adverse consequences not only for the UK carbon market but also for the Great Britain power market, ultimately resulting in higher power prices for consumers, EFET warned, adding that a standalone UK ETS would not be liquid enough to operate efficiently. The statement follows news that the UK Treasury and BEIS are at odds over whether to introduce a post-Brexit carbon tax or a domestic ETS.
Sasol, Secunda, and subsidies – Sasol got a $490-mln profit boost last year thanks to the country’s fuel subsidies and its exemption from a South African carbon tax, according to the International Institute for Sustainable Development (IISD). In a report, the institute said that Sasol’s proprietary coal-to-fuel technology is a significant source of GHGs from its Secunda plant, yet it still benefits from government policy on emissions and fuel price regulation. The fuel and chemicals company received a carbon tax exemption of 6.5 bln rand ($394 mln) last year as well as 1.6 bln rand in direct subsidies through South Africa’s regulated fuel price, according to the report. The researchers were unable to calculate Sasol’s production cost versus fuel refined from crude oil, but noted the process of using coal creates 2.5 times more emissions than the conventional method per unit produced. Sasol is South Africa’s second-biggest producer of GHGs after state power utility Eskom. Secunda, which supplies about a third of the motor fuel produced in South Africa, is the world’s biggest single-site emitter of the pollutants. (Bloomberg)
More and less in Mongolia – Mongolia became the latest nation to submit an updated NDC to the UNFCCC on Tuesday. The East Asian nation now aims to unconditionally reduce its emissions to 22.7% below BAU levels in 2030, compared to the 14% it pledged in Paris five years ago. The target could be upped to 27.2% if the country implements measures such as CCS and waste-to-energy technology. However, the 2030 baseline has been increased to 74.3 MtCO2e in 2030, compared to 51.3 Mt in the previous version. This would effectively allow the country to emit an additional 10-13 Mt at the end of this decade compared to its old target, according to Carbon Pulse calculations. The change is due to a mix of a change in methodology for measuring its base year emissions and adding agriculture, waste, and some industrial sectors to the scope of the NDC.
Every journey – Voluntary carbon trading has not gained much traction in China as general awareness is limited and companies and events see little marketing upside in offsetting emissions. But the Jiangxi Forestry Industry Expo, set to be arranged in Nanchang next month, is looking to buck that trend. The event will purchase 2,928 credits from in-province forestry projects to neutralise all estimated emissions, according to local media reports. Provincial officials also said the expo would showcase the Jiangxi Carbon Emissions Trading Centre, which will act as a platform for forestry offset credit trading in Jiangxi province.
Agree to agree – Just three weeks before the US election in which climate change may be a key issue, new survey results show the topic may be less politically polarising than many might expect. The survey, the fourth instalment in a series of reports by researchers at Stanford University, think-tank Resources for the Future, and ReconMR, found that 94% of Democrats believe climate change has been happening, as do 67% of Republicans. Majorities of Republicans (53%), Independents (71%), and Democrats (96%) favour pursuing the goals of the Paris Agreement, and majorities of all three groups think that the US government should act to deal with climate change.
Military miss – Brazil’s military operations are not halting deforestation in the Amazon, according to the Amazon under Bolsonaro project, a collaboration between Folha De S.Paulo and Climate Home. Operation Green Brazil, led by Vice President General Hamilton Mourao, has deployed hundreds of soldiers to try to contain deforestation and other environmental crimes enabled by the Trans-Amazonian Highway, a project that has been underway for 50 years. But despite the operation, the municipality of Apui lost over 23,000 hectares of forest from Jan. to Aug. 2020 – 5.1% more than the total area cleared last year, according to data from the non-governmental initiative MapBiomas, which monitors land use in Brazil.
And finally… Buzz kill – Money is pouring into the construction of vast insect farms to convert organic waste into fast-growing, protein-rich larvae, which are happily gobbled up by chickens, fish, and pigs. Startup Ynsect last week raised $372 mln to scale up its production of beetle mealworm in vertical farms for use in the pet food and fertiliser industries, while large sums have also been invested in companies breeding black soldier flies on a mass scale to produce protein powder and oil. (FT)
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