CP Daily: Wednesday June 30, 2021

Published 03:35 on July 1, 2021  /  Last updated at 03:35 on July 1, 2021  /  Newsletter  /  No Comments

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

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TOP STORY

Brussels plans inclusion of int’l shipping in EU ETS from 2023, price curbs for transport and buildings -draft

The European Commission is planning to bring international shipping into the EU ETS from 2023, with a transition period ramping up emissions coverage for the sector thereafter, according to a leaked draft, which also outlines measures to contain price spikes in a separate trading system for buildings and transport.

EMEA

Euro Markets: EUAs withstand UK auction pressure as gas rally continues

EUAs extended their six-week high on Wednesday to close in on their all-time record, as surging gas prices and optimism about the bloc’s market reforms outweighed pressure from Britain’s fortnightly auction.

EU carbon rally near exhausted amid pronounced H2 downside risk, investment bank warns

EU carbon prices are unlikely to see much more upside ahead of the scheduled mid-July release of major market reforms, and then they could partially unwind some of this year’s rally during the second half of 2021, analysts from a major investment bank said Wednesday.

AMERICAS

Virginia industry group asks court to void RGGI regulation, declare programme unconstitutional

A Virginia-based industry group advocated Wednesday for a court to void the state’s RGGI regulation and declare the programme an illegal carbon tax, while the state argued the final rule conformed to the specific directives of the state legislature.

California-registered CITSS accounts near peak as allowance prices remain near all-time highs

Thirteen general market participants opened Compliance Instrument Tracking Service System (CITSS) accounts over Q2 2021 as California Carbon Allowance (CCA) prices soared to all-time highs on the secondary market, data released by California regulator ARB on Wednesday showed.

RGGI revenues could lessen burden to Pennsylvania coal communities -report

RGGI auction revenues could ease the burden on Pennsylvania coal communities that could see power plant closures in the coming years as more coal-fired generation becomes unprofitable, according to think-tank analysis published on Wednesday.

ASIA PACIFIC

China’s Baotou Steel strikes 50-mln tonne forest carbon offset deal

Chinese steel giant Inner Mongolia Baotou Steel Union Co. has agreed to buy 50 million Chinese Certified Emissions Reductions (CCERs) over 25 years from a domestic forestry and paper company, a deal that could be worth up to 1 billion yuan ($155 mln).

Japan casts wide net in funding new batch of JCM projects

Japan’s environment ministry has selected 11 new carbon-cutting projects for co-funding under its Joint Crediting Mechanism, picking schemes in Indonesia, Mexico, the Philippines, Thailand, and Vietnam.

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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

Coming up painfully short – Projects in development will remove from the air only a fraction of the 1 bln tonnes of CO2 that needs extracting by 2025 to limit warming to 1.5C, according to the report by the newly-formed Coalition for Negative Emissions and consultancy firm McKinsey. It found the current pipeline of projects could remove only around 150 mln tonnes of CO2 by 2025, though scaling up the technology would lead to lower costs averaging $41-138 per tonne of CO2 removed by 2050. (Reuters)

Don’t forget about hydro – A new report by International Energy Agency found the growth of hydroelectric power plants worldwide is set to slow significantly this decade, potentially putting at risk countries’ net zero emissions goal and removing reliable and affordable energy supplies. IEA found hydro capacity will increase by 17% between 2021-2030, led by China, India, Turkey, and Ethiopia. The growth over the coming decade is 25% slower than the expansion over the previous decade.

Steel spotting – A project by Global Energy Monitor has mapped 553 steel plants representing 82% of the world’s installed capacity, as well as 42 proposed developments. The iron and steel industry is currently responsible for 11% of global CO2 emissions and analysis by the NGO concludes its emissions need to fall around 90% by 2050 in order to keep global warming below 1.5C. The author concludes that with plans for so many many high-emissions plants, the sector is poised to either lock in continued emissions or put an estimated $70 bln of investment at risk of stranding. (Carbon Brief)

Pricing in risk – Global equity markets could fall by as much as 20% if companies around the world were suddenly hit by a $75/tonne carbon price, according to new analysis that argues investors are failing to account for climate risks in equity valuations. The modelling, which looked at how hard a shock increase in the carbon price could hit share prices, said global markets would fall by about 4% if just scope 1 and 2 emissions — which cover emissions from a company’s own operations — fell under a $75/t tax. But Kempen Capital Management, the €86 bln asset and fiduciary manager behind the research, warned of a 20% drop if indirect emissions, known as scope 3, were included. The analysis also found that if the carbon price were to hit $150 a tonne, global markets could fall by as much as 41%. (FT)

AMERICAS

Sneaking into the budget – President Joe Biden’s administration may advance the proposed Energy Efficiency and Clean Electricity Standard (EECES) through the budget reconciliation process, according to a White House memo co-authored by national climate advisor Gina McCarthy. The proposed EECES programme would direct utilities to procure more renewable energy or enact energy efficiency measures to hit increasingly more stringent standards, with the concept modelled off of state-level programmes. The market-based programme was not included in the bipartisan infrastructure deal, and Democrats have been unable to muster the 60 votes need to clear the filibuster threshold in the Senate. By using the budget reconciliation process, Democrats could advance the EECES by simple majority, but they would need to ensure all 50 Senate Democrats vote in favour of the proposal. (Argus)

EMEA

Lockdown leakage – CO2 emissions in Germany and beyond fell to historic lows last year due to the COVID-19-related lockdowns, but initial figures for 2021 indicate emissions in the country are on the rise again despite public life remaining largely restricted. A colder winter and higher demand for heating oil contributed to the rise, according to a report by think-tank Agora Energiewende that found German CO2 emissions were 26% lower than usual in early April 2020 but were 2% above historic norms at the same point this year. (Der Spiegel, Clean Energy Wire)

Blind spots – Plastic production and waste remain blind spots in Europe’s climate policies, researchers have warned. Avoiding and better managing plastic waste should receive much greater attention by the German government in its bid to achieve a climate neutral economy, economic research institute DIW said in an analysis. Producing and disposing of 1 tonne of plastic on average causes about 5t of CO2 emissions, the researchers said. The recycling quota of the material in Germany is less than 20% of the total volume, while about two-thirds are being incinerated, causing further emissions. “A whole range of political interventions is needed to fully tap into the emissions reduction potential of a circular economy,” the DIW concluded, adding that German and European climate targets could only be achieved if circularity concepts are strengthened for all base materials. Producers and waste combustion are largely exempt from the EU ETS, which severely hampers the development of circular economy concepts in the sector, the DIW added. (Clean Energy Wire)

Joining the alliance – Some 12 new governments, business, and financial institutions joined on Wednesday the cross-sectoral Powering Past Coal Alliance (PPCA) committing to phase out the fuel before 2030, including five European governments – Spain, Croatia, Montenegro, North Macedonia, and Albania. Among these countries, North Macedonia plans to become the first country in the Western Balkans to phase out coal in 2027, Emerging Europe reports. The Polish region of Eastern Wielkopolska has also joined the PPCA. During the London Climate Action Week, the UK Government has also confirmed today it intends to bring forward its phaseout date to 2024 from 2025.

ASIA PACIFIC

No longer interested – China’s biggest bank, the Industrial and Commercial Bank of China, has dumped plans to fund a $3 bln coal-fired power plant in Zimbabwe, in a blow to a two-decade effort to develop the project, Bloomberg reports, citing a coalition of 32 environmental groups. The bank has pulled plans to fund the 2,800 MW Sengwa coal project to be built by RioEnergy, as well as the Lamu project in Kenya, in a rare move from a Chinese bank.

VOLUNTARY

Welcome to the jungle – Amazon’s carbon emissions climbed 19% last year, even as the Covid-19 pandemic spurred a sharp drop in global emission levels. In its annual sustainability report issued Wednesday, Amazon said its activities emitted the equivalent of 60.64 Mt of CO2 in 2020. That’s up from 2019, when it reported 51.17 Mt, an increase of 15% year over year. Amazon said its emissions grew in 2020 as a result of the pandemic-fueled growth of its business, though it managed to lower its carbon intensity, which measures emissions per dollar of sales, by 16% in 2020, which is in line with internal targets. (CNBC)

Gold project – Gold Standard, with support from the Swiss Federal Office for the Environment, is working to define principles and guidance for additionality and higher ambition in international carbon markets. The project is intended to support higher ambition under Article 6 of the Paris Agreement and to position buyers and host countries of Internationally Transferred Mitigation Outcomes (ITMOs) as partners in combating climate change. The project aims to develop a framework to ensure the additionality and enhanced ambition of market-based international cooperation through inclusion of strong climate mitigation and sustainable development impacts. The framework is intended to support the operationalisation of Article 6 following this year’s COP26 negotiations, informing development of credible, quality international carbon market assets through a process that is transparent, equitable, replicable and delivers maximum impact. Gold Standard will also work with ministries in several countries where climate protection projects are expected to take place, as these national governments prepare for cooperative approaches under Article 6. This project is expected to yield best practices to set a higher bar for international carbon markets and catalyse further high-impact finance flows.

Paying your share – Utility company Dominion Energy is rolling out a voluntary carbon offsets programme that would allow customers to add $5 increments to their monthly bill to help finance carbon-reducing activities and offsets for their natural gas use, according to a company announcement reported by ABC4.  The programme appeared to be for Utah-based customers, and its 2022 start is contingent of regulator approval. The company added the majority of the offsets would come from a Utah-based landfill.

SCIENCE & TECH

Hy potential – Little attention is paid to the practical costs of switching to renewable hydrogen from electrolysis in mature sectors already using hydrogen. European producers of hydrogen by steam methane reforming (the currently dominant, polluting way) are expected to receive €18 bln in free carbon allowances this decade, even though their conversion to green hydrogen alone would more than fulfil the EU’s goal of installing 40 GW electrolysing capacity by 2030. Think-tank Sandbag untangles widespread information to assess the true potential and cost of a switch away from grey to green hydrogen. It found that it would cost barely €1 bln to complete a switch to green hydrogen in three chemical sectors, with only a few policy changes needed, such as abolishing free CO2 allowances to steam methane reformers producing hydrogen, to allow fair competition with electrolysers; facilitating the direct access between renewable electricity production and electrolysing facilities, without linking to grids and power markets; and not creating unnecessary demand for green hydrogen in sectors that have alternative decarbonisation options. Sandbag developed an online tool to visualise the complementarity between subsidies, regulation and carbon pricing in promoting the deployment of hydrogen from renewable energy.

AND FINALLY…

What we do in the shadows – ExxonMobil continues to fight efforts to tackle climate change in the US, despite publicly claiming to support the Paris Agreement and carbon taxes, an undercover investigation by Unearthed has found. Keith McCoy, a senior lobbyist for Exxon, told an undercover reporter that the company had been working to weaken key aspects of President Biden’s flagship initiative on climate change, the American Jobs Plan. He described Biden’s new plan to slash GHGs as “insane” and admitted that the company had aggressively fought early climate science through “shadow groups” to protect its investments.”But there’s nothing illegal about that. You know, we were looking out for our investments, we were looking out for our shareholders,” he added. McCoy told the reporter that he is speaking to the office of influential Democratic senator Joe Manchin (WV) every week, with the aim of drastically reducing the scope of Biden’s climate plan so that “negative stuff”, such as rules limiting emissions and taxes on oil companies, are removed. During the undercover meeting, which took place via Zoom in May, McCoy also suggested that Exxon’s public support for a carbon tax as its principal climate policy is an “advocacy tool” and “great talking point” that will never actually happen. “On something like climate change there’s the forest fires, there’s an increase [of] .001 Celsius, that doesn’t affect people’s everyday lives,” he said. A second Exxon lobbyist, Dan Easley – who left the company in January after working as its chief White House lobbyist throughout the Trump administration – laughed when asked by an undercover reporter if the company had achieved many policy wins under Trump, before outlining victories on fossil fuel permitting and tax cuts. Unearthed reporters posed as recruitment consultants looking to hire a Washington DC lobbyist for a major client and approached McCoy and Easley for meetings. Exxon CEO Darren Woods responded to the expose by saying the company was “deeply apologetic” and that “comments made by the individuals in no way represent the company’s position on a variety of issues, including climate policy and our firm commitment that carbon pricing is important to addressing climate change.”

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