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- Cheap units from emerging nations dominate voluntary offset supply, survey shows
- MEPs mull phaseout of free carbon allowances under planned border levy
- EU Market: EUAs retreat further from record high despite supply shortage
- Canada releases draft Clean Fuel Standard regulations after narrowing scope
- WCI Feb. 2020 auction volume shrinks on smaller consignment
- WCI traders slice CCA length ahead of the December expiry
- Tianjin releases 2020 allocation plan for ETS
- CN Markets: Pilot market data for week ending Dec. 18, 2020
Low-cost offsets from emerging or developed nations dominated voluntary carbon market supply in 2019, while market participants fear efforts to standardise pricing will make premiums even harder to achieve for high quality activities, according to a report published Friday.
Members of the European Parliament are grappling with how quickly to withhold free carbon allowances from EU heavy industries under a proposed carbon border levy, while ex-officials warn of a potential diplomatic furore ahead.
EUAs slipped below €31 on Friday amid sliding energy and equity prices, with carbon continuing its retreat from this week’s record high despite a supply shortage.
The Canadian government on Friday released draft regulations to implement a Clean Fuel Standard (CFS), roughly a week after Prime Minister Justin Trudeau’s administration announced plans to trim the scope of the programme.
California and Quebec’s first post-2020 carbon auction will feature 54.8 million current vintage allowances, marking a decline from the Q4 sale largely due to lower consignment, according to an auction notice published Friday.
Compliance entities and speculators slashed California Carbon Allowance (CCA) futures holdings this week, as traders largely focused on moving positions further out on the curve ahead of the December expiry, according to US Commodity Futures Trading Commission (CFTC) data published Friday.
Tianjin has released the 2020 allocation plan for its municipal emissions trading market, tightening settings for local emitters and likely becoming the third region to ensure its local coal-fired power plant will be exempted from the national ETS in 2020.
Closing prices, ranges and volumes for China’s regional pilot carbon markets this week.
BITE-SIZED UPDATES FROM AROUND THE WORLD
Take this with a pinch of Suga – Japanese PM Yoshihide Suga is expected to ask his cabinet’s industry and environment ministers to study the feasibility of introducing a carbon pricing scheme in an effort to reduce GHGs, a government source told Kyodo news on Friday. According to the source, arrangements are underway for Suga to meet with Economy, Trade and Industry Minister Hiroshi Kajiyama and Environment Minister Shinjiro Koizumi at the premier’s office, possibly on Monday, and where the PM will instruct them to look into the plan. It remains unclear, however, whether Japan would be able to adopt the instrument to promote GHG reductions as some in the business sector remain cautious over such a move, fearing that the scheme could impact their profitability. Suga has pledged that Japan will achieve carbon neutrality by 2050, as many countries set similar goals to address climate change.
Computer says go for it – A number of Chinese companies are scrambling to carve out a pathway to net zero emissions after President Xi Jinping’s September carbon neutral announcement. The latest is China Energy Group, the world’s biggest coal-based energy company. This week it launched a research process on peaking and bringing emissions down to zero, it said in a statement. The initial strategy included massive investments in renewables and afforesting an area of 100,000 acres (40,500 hectares), which would likely include offsets. Analysts Refinitiv estimate the group’s coal-fired CO2 emissions last year amounted to about 705 million tonnes, a sixth of the emissions to be brought into China’s national ETS.
Coal rebound – The IEA says global coal demand for coal is set to jump 2.6% next year after a record pandemic-led drop in 2020, as recovering economic activity will lift use for electricity and industrial output. Between 2018 and 2020, global coal demand will have fallen by an unprecedented 7% due to the pandemic and as countries seek to shift to cleaner sources of energy. Renewables are set to overtake coal by around 2025 as the largest sources of electricity in the world, potentially followed by gas-fired power. (Reuters)
Brain trust – Federal Reserve Board Governor Lael Brainard on Friday laid out the case for the US central bank to take climate change risks into account as part of its financial stability writ, pushing back against some Republican lawmakers who say doing so would be ill-advised. “The Federal Reserve has been making important progress in laying the groundwork to incorporate climate considerations where they are material and relevant to our statutory responsibilities, today and in the future,” Brainard said in remarks prepared for an online event held by the Center for American Progress. And she went farther, flagging “significant opportunities” for collaboration with other US financial system regulators on climate change risk in coming years. “These efforts can help equip the deepest financial market in the world to support our dynamic private sector in assessing and addressing climate-related risks and investing in the transition.” The Fed earlier this week officially joined an international group of central banks focused on climate change risk, its most definitive sign yet of a new readiness to use its regulatory and research clout to mitigate the effects of global warming on the financial system. Its focus there, Brainard said, is on filling in data gaps so as to better understand macroeconomic, market, and market participant risk related to climate change.
Off the hook – The Federal Energy Regulatory Commissions (FERC) voted 2-1 Thursday against beginning an investigation into rolling blackouts in California power grid this summer. FERC Chair James Danly had proposed starting a proceeding to determine whether the California Independent Systems Operator (CAISO) needed modification ahead of next summer after issuing blackouts during a historic heatwave in August. CAISO issued a report earlier this year that found current planning processes were not designed to account for extreme heat storms, a transition to clean energy generation had led planning targets to provide insufficient resources in the early evening hours, and day-ahead market practices exacerbated the problem. All of those contributed to a lack of resources available.
Bonus blur – Oil and gas companies are continuing to reward their executives for increases in fossil fuel production or reserves despite their climate goals, according to a report by think-tank Carbon Tracker. Despite European majors’ net zero ambitions, they come out worse than their US counterparts, with 27 of the 30 largest listed companies around the world still following such practices. (DeSmog UK)
Shell shaping – Seven environmental groups including Greenpeace and Friends of the Earth have taken Shell to court in the Netherlands, in a case testing whether the Paris Agreement can be used to force oil companies to radically change their business model. They are demanding Shell cut its CO2 emissions by 45% by 2030 and to zero by 2050, compared to 2019 levels, tougher than the company’s pledge for net-zero operations by 2050 and to reduce its carbon intensity 30% by 2030 and 65% by 2050, compared to 2016 levels. Four public hearings took place in December in a district court and a verdict is expected in May next year. (Climate Home)
Recovery win – Negotiations between the European Parliament and EU member states on the bloc’s €672.5 bln coronavirus Recovery and Resilience Facility concluded early on Friday morning, with 37% of expenditure exclusively dedicated for the green transition. Under the deal, all investments will have to respect the thresholds laid out in the EU’s green finance taxonomy. All financing under the instrument will be subject to the ‘do no significant harm’, de facto excluding the vast majority of fossil fuel financing. However, Parliament’s push to secure a binding target on biodiversity did not make it into the agreement, something green group WWF calls a major blow to the Green Deal and to nature. (Euractiv)
Higher quotas – Germany will increase its emissions reduction quota for transport fuels to 22% in 2030 from the current 6%, following the approval of an environment ministry bill. This will affect all companies that supply fuel in Germany, which are obliged to reduce the emissions of all their products by a certain target. The regulation also aims for a 28% share of renewables in Germany’s transport sector by 2030, considerably more than the 14% benchmark set by the EU. The use of conventional biofuels will be limited to the current level of 4.4%, while palm oil is to be phased out entirely by 2026. (Clean Energy Wire)
Portuguese voluntary markets – Portugal will develop “local voluntary carbon markets” to stimulate citizens, businesses, and municipalities to reduce their emissions, with Matosinhos being the first municipality to implement a pilot project. The project aims to encourage consumers and businesses to make decisions that lower CO2 emissions, creating credits that can be bought by companies that aspire to move towards carbon neutrality. It will generate revenue that can be used by municipalities in activities that also promote a green, decarbonised and circular economy. The transactions will be registered in the AYR technology platform, which quantifies the values of carbon emissions avoided with its use. The development of this project is the result of a protocol between the CeiiA – Engineering and Development Centre, in Matosinhos, district of Porto, and the Ministry of Environment and Climate Action. (Portugal News)
Renewables up – The share of gross final energy consumption from renewable sources at EU level reached 19.7% in 2019, according to figures released on Friday by Eurostat, putting the bloc on track to overachieve its 20% target for 2020. Sweden had by far the highest share of renewables in final energy consumption among EU nations, making 56.4% of the share in 2019, ahead of Finland (43.1%), Latvia (41.0%), Denmark (37.2%), and Austria (33.6%). Fourteen out of the 27 nations have also achieved their national renewables targets in 2019, but other nations are lagging behind including France (at 5.8 percentage points from its national target), the Netherlands (at 5.2 pp), Ireland, and Luxembourg (both at 4 pp).
Wonk corner – The latest Carbon Mechanisms Review focuses on a range of initiatives all dedicated to further developing the Article 6 landscape – from the joint Japanese-German research on CDM transition numbers, to the Peru-Switzerland cooperation agreement, to Tunisia’s carbon market preparations, and to Article 6 readiness in the Asia-Pacific region. It also showcases experiences gained from REDD+ activities in the Democratic Republic of Congo over the past 10 years, and looks at the lessons that can be learned for the design of future market-based forestry activities.
And finally… Winter wonderland – Climate change is contributing to winter storms in the US Northeast even as the region is seeing more milder weather, according to a New York Times story. Winters have increasingly become warmer, but extreme weather events are occurring more often, Judah Cohen, director of seasonal forecasting at AER, told the newspaper. The Northeast saw 27 majors storms from 2008-18, or roughly 3-4 times the total from the previous five decades. A warmer atmosphere can hold more water vapour, potentially providing additional fuel for storms.
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