CP Daily: Friday July 23, 2021

Published 12:03 on July 24, 2021  /  Last updated at 12:17 on July 24, 2021  /  Newsletter  /  No Comments

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

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TOP STORY

New banking regulations “unduly penalise” EU carbon trading -financial markets trade group

New European banking regulations could unduly hamper global carbon trading by assigning an excessive risk weighting and penalising allowance carry trades in the EU ETS, a major trade organisation representing financial market participants has warned.

ASIA PACIFIC

CN Markets: CEAs hold above 50 yuan, but volumes dwindle

Allowance prices in China’s national emissions trading scheme have held firm above 50 yuan ($7.72) since the market opened last week, but trading activity has come down significantly as traders expect liquidity to remain patchy in the coming weeks.

EMEA

Euro Markets: EUAs rebound after dip below €50, post 3.8% weekly loss

EUAs edged higher on Friday after testing major support at €50, as buying interest evaporated this week and participants speculated over reports that some EU member states had disbursed free allocations.

More London carbon traders on the move

Gazprom’s trading arm has parted ways with its head of environmental products, while a London-based emissions trader at a carbon hedge fund appears to have left his role.

AMERICAS

US Carbon Pricing and LCFS Roundup for week ending July 23, 2021

A summary of legislative and regulatory action on carbon pricing, clean fuel standards, and clean energy at the US subnational and federal level this week, including in Washington state and federal legislation regarding a carbon tariff.

WCI speculative holdings rise as emitters add length for 2nd straight week

WCI speculative firms added to their California Carbon Allowance (CCA) position over the past week, as emitters slightly increased their holding over the period to mark the second consecutive week-on-week gain, according to US Commodity Futures Trading Commission (CFTC) data published Friday.

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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

INTERNATIONAL

Nothing in Naples – Energy and environment ministers from the G20 were unable to agree on the wording of a key climate change commitment in their final communique, Italy’s Ecological Transition Minister Roberto Cingolani said Friday. He told reporters that ministers meeting in southern Italy had failed to resolve two disputed points and that these would have to be passed on to G20 heads of state and governments to decide. He said negotiations with China, Russia and India had proved especially difficult, adding that one of the sticking points was the wording surrounding a 1.5-2 degree Celsius limit on global temperature increases that was set by the Paris Agreement. Relatively bland references to phasing out fossil fuel subsidies and eliminating carbon emissions by 2050 were also being resisted to varying degrees by major emitters Brazil, China, India and Saudi Arabia, a source told Reuters. A Bloomberg profile of Saudi energy minister Prince Abdulaziz bin Salman quotes him saying: “We are still going to be the last man standing, and every molecule of hydrocarbon will come out.” The piece also recounts how bin Salman “got his way” at last year’s G20 meeting where “European ministers wanted a greener statement; Saudi Arabia didn’t … The communique that emerged endorsed several of Saudi Arabia’s pet fixes to the climate crisis.” Green group WRI later said that its understanding is that the final expected to be released Saturday will say that major economies aim to put forward 2030 climate commitments (NDCs) by COP26 in November and that G20 countries will “strive” to deliver long-term strategies by then as well. The communique will also acknowledge the impacts of increased warming over 1.5C, though it will fail to include decisive commitments to limit global warming to 1.5C or reach net zero emissions by mid-century. The G20 meeting is seen as a decisive stage ahead of this year’s UN climate talks, which start in less than 100 days.

Upping ambition 1 – Solomon Islands has submitted an updated NDC to the UNFCCC, becoming the latest country to commit to reaching net zero emissions by 2050. The Pacific Island state had previously pledged a 45% carbon cut by mid-century. In its first NDC, Solomon Islands committed to reduce emissions by 12% below 2015 level by 2025 and 30% below 2015 level by 2030 compared to BAU, based on a cost of $126.7 mln. However, with international assistance Solomon Islands said it can further reduce its emissions by 27% by 2025 and 45% by 2030, based on additional financing of $109.4 mln. The updated plan also notes that the country now plans to use market mechanisms under Article 6 of the Paris Agreement, something which had previously just been under consultation. Enhancing its carbon sink through sustainable management and protection of its forestry, land use, coastal, and marine ecosystems will be one of its priority areas, the plan said.

Upping ambition 2 – Separately, Ethiopia submitted its own updated NDC, pledging to conditionally cut emissions by 68.8% below BAU by 2030 based on a budget financed 80% internationally and 20% domestically. The African nation’s previous goal was 64% below BAU, but that was based on a 2010 baseline of 150 Mt, BAU growth to 400 Mt by 2030, and a goal of 145 Mt by that year (5 Mt below 2010). The new target is based on an updated 2010 baseline of 247 Mt and BAU growth to 403 Mt by 2030, which translates into an unconditional goal of 347 Mt (14% below BAU, 100 Mt above 2010) and a conditional goal of 125.8 Mt (68.8% below BAU, 121 Mt below 2010). To achieve this, Ethiopia said it would provide $63.2 bln of the funding required, with the international community requested to provide the remaining $252.8 bln required – still an 20/80 split. The country said its previous NDC required $150 bln in financing.  Its new plan reiterated the country’s interest in participating in international carbon markets.

EMEA

Mixed bag – A carbon border adjustment mechanism (CBAM) and the related elimination of free EU ETS allowances will help the EU cut its emissions by 14% by 2030, according to the Polish Economic Institute (PIE), which noted that this would equate to a 0.3% reduction in global emissions. The think-tank added that its modelling assumes a 12% decrease in EU imports, an 11% drop in EU exports, and a 0.22-23% dip in EU GDP by 2030. The European Commission has proposed implementing a CBAM in 2026, which would lead to the abolishment of free allowances over the following 10 years. “In the case of Poland, the greatest negative impact of each CBAM variant on the adjusted disposable income for households from the first income decile (10% of the poorest) was also noted,” PIE noted. For this group of the poorest households, this means an increased exposure to the effects of energy poverty, the analysts concluded. (WNP)

Benz friends – German carmaker Daimler said all its new vehicle platforms will only make EVs from 2025, when spending on traditional combustion-engine technology would be “close to zero”. However, Daimler – to be renamed Mercedes-Benz as part of plans to spin off its trucks division later this year – stopped short of giving a hard deadline for ending sales of fossil-fuel cars, with boss Ola Kallenius only saying the firm wants to be “dominantly, if not all electric” by the end of the decade and the transition would come with job losses. (Reuters)

Lobbying non-stop – Gas industry lobbyists have stepped up meetings with EU policymakers amid a political tussle on whether to badge the fuel as sustainable, analysis from campaign group Reclaim Finance showed. Gas-related lobbyists held 323 meetings between Jan. 2020 and May 2021, the NGO said in a report, citing EU Transparency Register data, up from 295 meetings in the Jan. 2018-July 2020 period. The increase comes as several governments and companies battle to include gas in the bloc’s landmark list of activities that can be considered sustainable. Despite a group of expert advisers saying that gas power could only be included if it met stringent emissions rules – something no gas plant in Europe currently does – the European Commission has yet to make a call. (Reuters)

Maltese please – Malta will be making its case for special consideration as an island on Europe’s periphery in discussions on the EU’s Green Deal, the country’s Enterprise Minister Miriam Dalli said. The European Commission’s ‘Fit for 55’ proposal is only the first step and she anticipates a “long and heated” debate to achieve carbon neutrality. “We have to be able to convince when explaining our particularities,” she said, noting that Malta depended on aviation and shipping for its commercial, travel and tourist connections. The EU has a target to become carbon neutral by 2050, with a goal to cut emissions by at least 55% by 2030. Dalli said that Malta has already managed to convince the Commission to allow funding for a natural gas pipeline between Sicily and Malta that is hydrogen-ready. She had argued that Malta’s case was particular since despite its intention to shift to hydrogen there was no readily-available supply of the fuel nearby. The pipeline will have to transport natural gas in the immediate future but be able to shift to hydrogen when this becomes commercially available. (Malta Today)

AMERICAS

Worst yet to come? – A significant and far-reaching heatwave is poised to build across much of the continental US during the next few weeks, Axios reports. It could be the most expansive in the country so far during this unusually hot summer, aggravating drought conditions and wildfires. Data released Thursday showed that what is already the worst western drought so far this century is intensifying. The US Drought Monitor shows that 65.4% of the western US is in “extreme” to “exceptional” drought conditions, the worst two categories on the scale, up from 52.8% on June 1.  A heat dome, which is an area of high pressure aloft that helps to lock in place hot, dry weather, will form this weekend over the West and eventually migrate to a position across the Central Plains. Computer models show temperatures climbing to 10-15F or higher above average for this time of year across the affected areas. Temperatures will easily reach the mid-to-upper 90s to triple digits from portions of the Pacific Northwest to the Plains, parts of the Midwest, and eastern US (with the exception of the Northeast). One casualty of this year’s record-shattering heatwave that baked the Pacific Northwest last month was Christmas tree farms. “The second day of the heat, it was 116. I came in the driveway that night and seen the trees were basically cooking. Burnt down to nothing,” Jacob Hemphill, a tree farmer in Oregon City told Reuters. He estimates he lost over  $100,000 worth of trees. Extreme heat and massive floods have already killed hundreds of people across North America, Europe, and Asia this summer. (Climate Nexus)

Change coming? – An Inside California Politics/Emerson College poll found registered voters slightly support Governor Gavin Newsom in the upcoming recall election, but residents may seek an alternative to the first-term Democrat during the 2022 gubernatorial election. The poll found 48% of the 1,000 registered voters surveyed supported keeping Newsom in office, with 43% backing the recall and 9% undecided. Looking to the 2022 election, the poll found 58% backed an alternative candidate and 42% would re-elect Newsom. The Democrat governor has faced a wave of criticism over the past year for his handling on the COVID-19 pandemic, with he received widespread backlash for attending a high-end restaurant during a lockdown.

Falling short – Canada’s federal, provincial, and territorial governments have failed to plan emissions cuts sufficient to achieve the country’s net zero targets, says a new report. The Pembina Institute, an energy and climate think-tank, concludes that Canada isn’t going to achieve its recently announced 2030 or 2050 net zero goals. “Unfortunately, we are not on track to meeting Canada’s new target of reducing global greenhouse gas emissions by 40-45% by 2030, based on 2005 levels,” said Isabelle Turcotte, Pembina’s director of federal policy. “The most optimistic projections show that we are on track to reduce emissions by 36%. So there’s a big gap here.” Pembina’s report says that while progress has been made — nationwide carbon pricing and the phase-out of coal-fired electricity — it’s been offset by emissions increases elsewhere. Turcotte said the institute’s report is the first to assess planned federal, provincial and territorial action to meet the net-zero objectives. (CBC)

Opening up the reserve – Quebec’s Environmental Ministry released a Reserve Sale notice on Friday afternoon, but no regulated entity is expected to participate in the auction. The sale would be held on Sep. 21 if any Quebec-based compliance entity registers by Aug. 23, and it would mark the last opportunity to buy allowances valid for the Nov. 2021 deadline. To date, California and Quebec have not held a Reserve Sale as prices have remained significantly below those prices tier levels. The lowest reserve tier is set at $41.40, or $18.88 above the Sep-21 V21 settlement of $22.52 on Thursday.

AVIATION

Hy flying – A senior manager at aircraft maker Airbus says that zero-emissions planes will be flying by mid-century, reports BBC News. It adds: “Airbus has set a target of commercial ‘climate-neutral’ flights by 2035, with hydrogen as a primary power source.” It quotes Gareth Davies, Airbus head of industrial architecture for wing, saying: “We have a challenge today to try and symbolically get towards a zero emissions product by around 2050 … So, essentially, we’re looking at by the mid-point of the century, that we will have products flying with that target and with that goal.” (Carbon Brief)

AND FINALLY…

All in the trunk – Chinese apparel brand HOdo has exported its first batch of carbon neutral clothing, Xinhua reports. According to a company statement, verifiers DNV has certified that a group of yew trees has been planted to offset emissions associated with the production and shipment of 11,000 swimming trunks to the US. HOdo hopes to inspire other apparel brands to make efforts to cut their emissions, the company said.

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