CP Daily: Wednesday June 23, 2021

Published 22:58 on June 23, 2021  /  Last updated at 23:06 on June 23, 2021  /  Newsletter  /  No Comments

A daily summary of our news plus bite-sized updates from around the world.

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TOP STORY

China tells aluminium and steel industry bodies to prepare for carbon market

China’s environment ministry has told the industry associations for aluminium and steel producers to help draw up CO2 allocation plans, indicating the sectors are about to be brought into the national emissions trading scheme.

EMEA

Euro Markets: EUAs hit 5-week high as gas rally drags up energy complex

EUAs gained more than 2.5% to hit a five-week high on Wednesday as gas prices continued to rise and bullish technicals drew more buyers.

EU’s flagship R&D fund to launch €80 mln calls for carbon removals

The European Commission will launch three calls for R&D on carbon dioxide removals on Thursday, offering up a total of €80 million this year under its flagship research fund.

AMERICAS

California spent months examining non-compliance issue before launching offset probe, documents show

California regulator ARB spent months evaluating a potential regulatory violation at a Wisconsin dairy farm before launching a formal review, documents show, while the offset project appears to have adjusted out a subsequent non-compliance event in a future credit reporting period.

California offset issuance maintains snail’s pace as monthly total drops to 3-year low

California doled out nearly 170,000 compliance offsets this week as the June monthly issuance figure dropped to a three-year low amid a string of small issuances, according to government data released Wednesday.

ASIA PACIFIC

NZ carbon prices jump to new high above NZ$43 after auction breaks record

New Zealand sold all 4.75 million carbon allowances on offer at its second ETS auction on Wednesday, with the sale clearing at a record NZ$41.70 ($29.27) and causing a secondary market surge even higher.

Tianjin to hold pre-compliance carbon auction on June 29

The Tianjin municipal government will auction off 1.5 million CO2 allowances on June 29, the day before the annual compliance deadline.

VOLUNTARY

INTERVIEW: Startup founded by ex-BP risk boss aims to streamline net zero commodity trading

With corporate net zero ambitions growing by the day, a startup led by oil major BP’s former risk boss wants to certify the carbon neutrality of the commodity transactions that will form the basis of many of these efforts.

COMMENT

Climate impact claims to crowd in private sector finance

There is growing interest in uses of the carbon market that do not rely on unique claims, and expanding the use of the voluntary carbon market to accommodate new claims can crowd in even more investment without being limited to a narrowing pool of options available for offsetting, writes Sarah Leugers of Gold Standard.

ICYM

COVID claims life of “beloved and honourable” California carbon market economist

A respected and admired economist covering California’s carbon market has passed away after falling ill with the coronavirus.

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BITE-SIZED UPDATES FROM AROUND THE WORLD

Carbon Pulse has teamed up with CME Group to provide its clients with regular updates on the global carbon markets. Check out these briefs for the latest insights on pressing trends and events impacting markets, published every other week. Registration required

CONFERENCE

The Argus Live: Carbon Markets and Regulation (15-16 July) conference is a 2-day virtual event that will provide participants with the latest pricing predictions, as well as updates on global policy and regulation within the carbon market. There will also be sessions focusing on the developments and opportunities in the voluntary carbon market. Hear from speakers such as DG CLIMA, EEX, ClearBlue Markets, CF Partners, BASF, Gold Standard, South Pole, Redshaw Advisors and many more. Carbon Pulse readers can receive 15% off their registration fee using the code CARBONPULSE15 at checkout. Register today!

INTERNATIONAL

Human indictment – Life on Earth can recover from a drastic climate shift by evolving into new species and creating new ecosystems … Humans cannot”. That’s according to a 4,000-page draft copy of the upcoming Working Group II report on the impacts of climate change from the UN-backed IPCC scientific panel obtained by AFP. The final document is not due out until Feb. 2022, too late to inform policymakers at this year’s major UN summits on climate, biodiversity, and food. AFP highlights four key takeaway messages: the 1.1C of warming that has taken place has already brought profound changes; the world must prepare and adapt to this; tipping points could lead to compound and cascading impacts are a threat; and that action can still be taken to avoid worst-case scenarios and prepare for impacts that cannot be prevented.

EMEA

Bad timing – UK ministers are set to approve a new oil and gas project in the North Sea, months before the nation hosts the COP26 climate conference in Glasgow, The Times reports. According to the newspaper, the Cambo heavy crude field off the coast of the Shetland Islands will extract 150 mln barrels of oil and emit more than 3 mln tonnes of CO2e over its lifetime. It adds that the development is subject to a consultation run by the government’s Oil and Gas Authority, which is expected to give approval. While new fields are meant to be “compatible with the UK’s climate change objectives” under a deal between the government and industry in March, the project is not covered by the new “climate checkpoint” system as it was licensed for exploration in 2001 and 2004, The Times adds. (Carbon Brief)

The landlord-tenant dilemma – An agreement by the German federal government coalition to evenly split the extra costs from the country’s new carbon price on heating fuels (nEHS) between landlords and tenants has failed at the last moment, according to national media reports. Tenants will now need to continue bearing the additional costs caused by the nEHS, introduced on Jan. 1, as the ruling CDU/CSU refuses to include landlords in the sharing of the costs, arguing that they have no influence on tenants’ heating usage. The agreement to split the burden of the carbon price was supposed to be part of the emergency climate programme adopted in the cabinet of ministers on Wednesday. (Clean Energy Wire)

Room for improvement – As the European Commission starts endorsing national COVID-19 recovery plans submitted by EU countries, these risk falling short of the bloc’s green objectives, campaigners have warned. Under rules agreed in December, the national plans that the 27 member states must submit in order to tap into the EU’s €750 bln recovery fund must dedicate at least 37% of spending to green investment. But there are concerns that this will not be the case – as well as fears around the amount of funding set aside for fossil gas and a lack of money dedicated to biodiversity. Few countries passed the 37% bar, according to analysis in early June by the Green Recovery Tracker, which found that, out of 16 countries studied, only two – Finland and Germany – surpassed it. Italy, Poland, and Portugal did not even set aside 20% of the money for green investment, the analysis found. (Euractiv)

Dutch floor – The Netherlands’ parliament adopted a regulation to bring forward a review of the country’s minimum CO2 price for the power sector by two years to 2023. A minimum CO2 price introduced in 2020 is yet to have any effect because it only kicks in when EU carbon prices drop below a certain threshold – set at €12.30/tonne in 2020 and rising annually to reach €31.90 in 2030. In addition, the lawmakers passed a motion urging the yet-to-be-formed coalition government to push for the introduction of an EU Carbon Border Adjustment Mechanism alongside the termination of free carbon allowances to industry.

AMERICAS

Not so gas – A three-judge panel for the US Court of Appeals for the DC Circuit on Tuesday vacated a federal order granting a $287-mln Midwest gas pipeline license to operate, in what environmentalists called a “historic” move against an already-constructed and operational facility. The court ruled in favour of the Environmental Defense Fund, finding that the US Federal Energy Regulatory Commission “ignored record evidence of self-dealing and failed to seriously and thoroughly conduct the interest-balancing required by its own Certificate Policy Statement” in its 2018 order allowing the Spire STL pipeline project to move forward. The move could have major implications on future and current gas infrastructure projects, say stakeholders. Environmentalists heralded the ruling as a definitive win against a commission they say has historically rubber-stamped gas infrastructure projects without proponents appropriately demonstrating need for them. (Utility Dive)

Clean compromise – A coal-state Republican and a centrist Democrat are pitching a compromise alternative to one of President Joe Biden’s signature proposals to address climate change. Republican Rep. David McKinley of West Virginia and Democratic Rep. Kurt Schrader of Oregon are introducing legislation later this week, called the Clean Energy Future through Innovation Act, to impose a clean electricity standard requiring utilities to slash emissions 80% by 2050. Biden’s clean electricity standard, floated as part of his American Jobs Plan, would mandate 100% carbon-free power by 2035. The McKinley and Schrader mandate for 80% clean power would not kick in until 10 years after enacting the bill, after first imposing a massive scale-up of research and development spending for clean energy technologies through 2030 to lower their cost. (Washington Examiner)

Conservative caucus – Rep. John Curtis (R-Utah) unveiled a new caucus on Wednesday aimed at educating and organising Republicans on climate change. Dubbed the Conservative Climate Caucus, the group has attracted around 50 members and hopes to inform Republicans on climate science and technology and to discuss potential legislation. The group’s primary mandate is to get Republicans comfortable enough on climate policy to be more assertive in legislation, as opposed to dictating the legislation itself, Curtis said. Some of the areas he hoped to zero in on in particular include nuclear power, innovation for direct air capture and other forms of carbon removal, and job growth in fossil fuel country. (Politico)

Lonestar charge – General Motors and a Shell-owned power company unveiled a partnership on Wednesday aimed at providing renewable electricity to Texas customers and free overnight charging to state residents who own GM electric cars. The renewable energy plans are rolling out this month, and they will offer customers fixed electricity rates sourced from wind, solar, and other renewable sources, through Shell Energy North America’s subsidiary, MP2 Energy. The EV charging options will be added in late July, according to a GM spokesperson. (Axios)

Clean careers – Jobs in Canada’s clean energy sector are forecast to grow nearly 50% to reach roughly 640,000 positions by 2030, according to a new report from Clean Energy Canada at Simon Fraser University. The domestic clean energy sector – which the CEC defines as including clean energy generation and delivery, energy efficiency and retrofitting, storage technology, clean transportation and more – already employs 430,500 people, and jobs are projected to grow roughly 4% annually over the next decade. The clean energy sector’s GDP is also on track to increase by 58% between 2020 and 2030, to reach roughly C$100 bln by the end of the decade, and clean energy is expected to represent 29% of Canada’s total energy GDP, up from 22% in 2020. (Financial Post)

Presidents a poppin’ – Washington DC-based think-tank World Resources Institute (WRI) on Wednesday announced that it has selected Ani Dasgupta to be its next president and CEO. Ani, who currently leads WRI’s Cities programme, will replace Andrew Steer, who left this year to head the Bezos Earth Fund. Additionally, WRI’s Interim President and CEO Manish Bapna will be departing the organisation to become the new president and CEO of green group Natural Resources Defense Council (NRDC).

ASIA PACIFIC

Getting started – Datang Group has become the first of China’s big five state-owned power companies to outline a carbon neutral plan, though the company doesn’t expect to reach that goal until 2060. It has also pledged to peak its GHG emissions by 2030, which is five years later than it indicated earlier this year. (China Power Network)

Unpleasant surprise – Australia’s Coalition government has planned to funnel large amounts of cash through ARENA, the country’s renewable energy agency, to technologies such as soil carbon and CCS. But the opposition on Tuesday evening voted to disallow expanding ARENA’s remits beyond renewables. The vote is considered a big loss for the government’s technology push, and leaves it now to find other ways to distribute its investments. The outcome was made possible because Pauline Hanson, leader of the far-right wing One Nation party and usually a backer of government polices, didn’t show up for the vote. (Guardian)

Not going so well – Kazakhstan is on track to miss its Paris Agreement target, as it is still imposing business-as-usual (or worse) policies on emissions, according to a forthcoming paper in the Environmental Science and Policy journal. That includes its ETS, which is still not fully functional, eight years after it started. (Eurasianet)

More doors closing – South Korea’s three major non-life insurers will no longer provide coverage for new coal power projects, including construction and operation, according to Reuters. This marks the first time non-insurance companies in Korea are joining the global trend. However, only DB Insurance said it will gradually retract its existing coverage, while Hyundai Marine & Fire and Hana said they would keep their existing portfolios.

VOLUNTARY

Watchdog watch, part 1 – A global securities watchdog plans to publish its first regulatory guidance for raters of corporate environmental, social, and governance (ESG) performance in July to stem growing concern among asset managers about overstated green credentials. Ashley Alder, chair of the IOSCO body that groups securities regulators from the US, Europe, and Asia, says that many countries have no rules for ESG raters. “Many on the buy and sell side have signalled very clearly how confusing the multiplicity of different ESG ratings choices can be, again raising serious questions about relevance, about reliability and about greenwashing,” Alder told City & Financial’s City Week event on Wednesday. “We are now working on ways to ensure better transparency and clearer definitions. Our work is likely to involve guidance to service providers and ratings agencies, together with recommendations for regulators on how to deal with potential conflicts of interest.” The watchdog also wants asset managers to incorporate more meaningful climate-related considerations into their risk management as the companies in which they invest face more stringent ESG disclosure rules. (Reuters)

Watchdog watch, part 2 – Separately, the EU’s banking watchdog on Wednesday told banks in the bloc they must have a 10-year plan spelling out how they will deal with ESG risks to their bottom line, Reuters and Euractiv reported. The report from the European Banking Authority (EBA) set out recommendations for banks and their supervisors for approaching ESG risks and to help the EU meet its goals of cutting emissions by 2050. Banks should plan strategically over a period of at least 10 years to show their resilience to different scenarios, disclose strategic ESG objectives, and assess the need to develop sustainable products, EBA said. Climate risks can include “physical” or weather-related events like floods, and “transition” risks from sudden changes in asset values. The EBA report looks at the second pillar of core banking rules that assess how risks at a lender are managed. It is expected to set out detailed guidance for the third pillar relating to disclosures of risks later in the year. Work on pillar one or whether actual capital requirements need changing to reflect ESG risks, is expected at a later date.

Don’t be a fool – Andy Howard, global head of sustainable investment and ESG at Schroders, has warned against the usefulness of third-party sustainability ratings, arguing that using these in isolation can be a “fools’ errand”. Speaking at the inaugural Sustainable Investment Festival, Howard said he and his team did use third party scores but only as one part of their in-house analysis process. The reason for this are the significant discrepancies in ratings between the likes of Sustainalytics and MSCI. “Life would have been a lot easier if we could boil all of this down to off-the-shelf measures, of which there are many that exist across the market,” said Howard. “But there is not much relationship between them, and the ratings of the commonly used ESG rating schemes do not bear much resemblance to one another. Assuming there is a singular answer to the question ‘which companies are good, and which are bad’, on sustainability, is a bit of a fools’ errand.” (Investment Week)

AND FINALLY…

Paging Monty Python – The founders of Holy Grail, a two-year-old startup based in Mountain View, California, are taking a micro approach to solving the outsized problem of capturing carbon. According to TechCrunch, the startup is prototyping a direct air carbon capture device that is modular and small – a departure from the dozens of projects in the US and abroad that aim to capture CO2 from large, centralised emitters, like power plants or industrial facilities. Holy Grail co-founder Nuno Pereira said this approach will reduce costs and eliminate the need for permits or project financing. While Holy Grail has a long development and testing phase ahead, the idea has captured the attention and capital from well-known investors and Silicon Valley founders. Holy Grail recently raised $2.7 mln in seed funding from various investors, some high profile.

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