CP Daily: Friday September 3, 2021

Published 09:51 on September 4, 2021  /  Last updated at 09:55 on September 4, 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, US climate talks fail to inspire confidence ahead of Glasgow

The US special envoy on climate, John Kerry, on Friday left China after several days of talks, but the absence of a joint statement at his departure leaves little reason for optimism ahead of the Glasgow COP26 UN climate negotiations in November, observers say.

VOLUNTARY

Saudi Arabia to launch carbon trading exchange for MENA region

Saudi Arabia’s Public Investment Fund and the country’s markets operator Tadawul Group on Friday announced plans to develop a carbon trading exchange for the Middle East and North Africa region.

New asset management firm targets $1 bln for premium offset fund

A new environmental asset management firm has opened calls for its inaugural voluntary carbon offset fund, seeking to raise up to $1 billion.

EMEA

Euro Markets: EUAs post 3.9% weekly gain after setting new record

EUAs posted a new intraday record on Friday as investors were said to be back on the buying side, though carbon then faded as traders took profit, still posting a 3.9% weekly gain.

AMERICAS

US Carbon Pricing and LCFS Roundup for week ending September 3, 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 developments in Virginia and California.

WCI compliance entities added to positions as CCAs surged after Q3 auction

WCI regulated entities reduced their open short positions over the past week as the front-month and current auction clearing price (ACP) index futures contracts expired, while speculators held holdings stagnate, according to US Commodity Futures Trading Commission (CFTC) data published Friday.

ASIA PACIFIC

CN Markets: China ETS lull continues as traders await regulations, more permits

China’s carbon price shed another 6% this week, while trading volumes fell to barely a trickle as demand remained low amid a lack of regulatory and administrative developments.

INTERNATIONAL

Hydrogen no silver bullet for energy transition, report warns

A report from an environmental non-profit group argues that the hyping of hydrogen as a climate solution only delays the implementation of more effective solutions, such as electrification of the buildings and transport sectors.

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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

Vax on track – A COP26 spokesperson has said the UK is on track to vaccinate all delegates who need it ahead of the climate summit in Glasgow in November, Sky News reports. The outlet says it has “spoken to civil society organisations around the world who were concerned that, with little over eight weeks before the talks commence, few had received a single vaccine dose or much communication about the process.” However, the spokesperson “has now confirmed first doses of AstraZeneca will commence from next week,” adding “in the case of AstraZeneca or any other double dose vaccine, second doses will follow in mid-October, allowing a two-week period for the vaccine to kick in before the recipient travels to Glasgow.” The spokesperson noted the UK’s offer to vaccinate COP26 attendees was “part of a wider package of measures we will have in place to be able to host a safe COP26 with in-person participation.” (Carbon Brief)

EMEA

Overturned – The EU’s top court on Thursday overturned a finding that an EU subsidy to strengthen the UK electricity market during winter violated bloc rules against state aid, saying a formal investigation should have preceded any decision about the programme’s legality. The verdict by the European Court of Justice reverses one from Nov. 2018 in which the EU General Court disallowed support via capacity market auctions on the grounds that it amounted to subsidies for fossil fuel generators and discriminated against demand response technology. (Law360)

Bust transition – European regions want to reward polluters rather than exclude them as they try to shift towards climate neutrality, WWF said. The green group examined 14 of the local plans submitted so far – by eight member states – in application for the EU’s €17.5 billion Just Transition Fund. It found that nine of the plans do not commit to ending fossil gas use by 2035, and eight will not have ended coal or oil shale use by 2030. This contradicts the commitments made in the Paris Agreement to limit global temperature increase to 1.5C, WWF added. It said that while some of the assessed plans showed promise, for example on the circular economy, none were an outstanding example of good just transition practice. On the back of these findings, WWF and nine other organisations have written to the European Commission to urge the plans are brought in line with EU climate goals and sustainability and social principles.

Worse situation – The European Commission has received many concerns about its proposed carbon border adjustment mechanism (CBAM) and must make sure that it is WTO-compliant, according to EU Trade Commissioner Valdis Dombrovskis. “We cannot put exporters to the EU in a worse situation than our own producers,” Dombrovskis said during a virtual panel this week. “We cannot create double protection for EU industry,” he said, referring to free EUA allocations in addition to a CBAM. Dombrovskis added that countries are still a long way off creating a global emission trading system, with nations putting forward different approaches. (Bloomberg)

Car closure – German environmental organisations DUH and Greenpeace have launched legal action against carmakers VW, BMW and Mercedes Benz, as well as oil and gas company Wintershall Dea over their climate impact. The NGOs are ready to launch four lawsuits in German courts, unless the companies make commitments within weeks to phase out combustion engine cars by 2030 and cease developing new oil and gas fields by 2026. The organisations base the cases on a recent landmark climate ruling by Germany’s constitutional court, and use a ruling by a Dutch court against oil major Shell as a role model. (Clean Energy Wire)

(Don’t) eat our dust – Drax is facing criminal prosecution by the UK’s Health and Safety Executive over allegedly risking its workers’ health by exposing them to dust from the wood pellets burnt at its North Yorkshire power plant. The utility is due to face a hearing at Leeds magistrates’ court on Nov. 30, according to Sky News. It faces a second charge of breaching risk assessment obligations before allowing employees to work with potentially hazardous substances. Drax has converted four units of the plant near Selby to burn biomass wood pellets, which attract subsidies, of which it received £832 mln last year. A Drax spokesman said that the company could not comment on the issue. The HSE did not respond to a request for comment. (Times)

Cutting catastrophe – A plan to lift a ban on new logging permits in the Democratic Republic of Congo has prompted a letter from a group of environmental and human-rights organisations that are warning that this means “an impending climate and biodiversity catastrophe.” The plan goes against President Tshisekedi’s promise to expand forest protection and is another slap in the face to several multi-million dollar programmes that have tried to reform the DRC forest sector in recent decades. (REDD-Monitor)

We’re Barc! – Barclays is planning to relaunch its emission trading business, nearly 10 years after it pulled out from the market. The London-based investment bank is considering setting up a desk in New York, people with knowledge of the matter told Bloomberg. Plans are still preliminary, one of the people said. A spokesperson declined to comment.  Barclays was one of the first banks to get involved in carbon markets in the early 2000s. However, if the latest is true, Barclays would this time be a late-comer, with most major banks having already set up new trading desks or maintaining the ones they operated since the last time carbon prices surged to records in the late 2000s.

AMERICAS

Tax time – US Senate Finance Committee Democrats on Friday floated the idea of a carbon price as one of several options they’re looking at to help pay for their $3.5 trillion spending package, according to a document obtained by The Hill. The Dems are in the process of crafting the reconciliation bill, and it’s unclear which of the policies listed in it, including the carbon price, will ultimately make it into the package. The document lists several three potential approaches for its carbon pricing scheme:

  • A tax on the CO2 content of “leading” fossil fuels like coal, oil, and natural gas upon extraction. This tax would start at $15/tonne and increase over time.
  • A tax per tonne of CO2 from major industries including steel, cement, and chemicals
  • A tax per barrel of crude oil

The document said that each of these provisions would come with a rebate or other form of relief for low-income taxpayers and a border adjustment to make sure that foreign companies also have to pay for the tax. It also pitches repealing “major” fossil fuel tax subsidies including tax credits and deductions for extraction, “preferential treatment” for foreign income, and the ability for pipeline companies to avoid corporate income tax. As well, Dems suggest a 20-cent/pound fee on the sale of virgin plastic that’s used to make single-used plastics.

Missing Chatterjee – US Representative Sean Casten told Utility Dive that President Joe Biden needs to quickly fill former Commissioner Neil Chatterjee’s seat on the Federal Energy Regulatory Commission (FERC) to avoid climate change-related policies stalling on split votes. Without Chatterjee, the four-commissioner panel is split evenly between Democrat and Republican nominees. In recent years, FERC has explored carbon pricing proposes in the wholesale power markets, with New York among those looking at implementing the policy. Casten said a Democrat-controlled FERC could help advance some of those climate policies.

Zero buyers – Quebec’s environmental ministry on Friday cancelled a reserve auction for carbon allowances after no emitters registered to participate. WCI partners California and Quebec are required by regulation to send out a notice for an Allowance Price Containment Reserve auction before the triennial full compliance deadline, but neither jurisdiction has held one in the programme’s history as secondary market prices are valued significantly below the reserve tier prices. The lowest APCR tier is set at $41.40 for 2021, while California Carbon Allowances are currently valued in the $24 range. APCR allowances can only be purchased by emitters and cannot be transacted on the secondary market.

ASIA PACIFIC

Eyes on India – The UK government has announced a $1.2 bln package to support public and private investment in green projects and renewable energy in India. The package includes $1 bln of investment in green projects over five years from the UK’s CDC development finance institution, and a new $200 mln private and multilateral investment into the joint UK-India Green Growth Equity Fund which invests in Indian renewable energy. (Livemint)

You can go your own way – The energy minister for New South Wales, Matt Kean, said that Australia’s states will carve their own paths in driving the transition to clean energy “whether Canberra likes it or not,” according to RenewEconomy. Kean has been key to Australia’s largest state adopting a pro-renewables stance in its energy policy, with five renewable energy zones being planned. In contrast, his federal counterparts have been reluctant to offer policy support for clean energy. “A fragmented approach to dealing with the NEM [National Energy Market] is not the best way, but I can’t let the perfect be the enemy of the good,” Kean said at a webinar. Kean is also sceptical of recent federal government efforts to offer financial support to keep large coal and gas generators running. Instead he prefers energy market regulators and state governments to manage an orderly transition to low carbon power sources without disrupting supplies or causing price spikes.

VOLUNTARY

Supersize me – Commodities marketplace Xpansiv is understood to have upsized its pre-IPO capital raise to $100 mln after getting significant demand from investors, AFR reports. The scaled up raise is believed to enable the business to capitalise on acquisition opportunities ahead of a listing on the ASX, which is slated for early next year. Cornerstone demand is understood to have come from new strategic investors who use Xpansiv’s trading platform and was also supported by international and domestic institutional investors and high net worth backers. Xpansiv declined to comment. Xpansiv grew trading volumes by 374% in Q2, compared to the same time last year, and it’s understood that company has continued to experience rapid growth. The exchange, which focuses on ESG-inclusive commodities including voluntary carbon credits, has a host of well-known investors from its previous capital raises, including Caledonia’s Will Vicars, BP’s venture capital arm, S&P Global, Larry Leibowitz, the Fairfax family office Cambooya Investments, American billionaire and private equity pioneer Thomas H. Lee and Jack Klinck, a former executive at State Street and BNY Mellon.

SCIENCE & TECH

Bringing chills – A first-of-its-kind study shows how climate change is causing more periods of extreme cold in the central and eastern US like the one that killed hundreds of people in Texas earlier this year. The research, published Thursday in Science, measured atmospheric changes to explain how the rapidly warming Arctic destabilizes the vortex that (usually) keeps frigid air held over the polar region, leading to more ‘outbreaks’ in which icy air dives down into lower latitudes. “It is counterintuitive that a rapidly warming Arctic can lead to an increase in extreme cold in a place as far south as Texas, but the lesson from our analysis is to expect the unexpected with climate change,” Judah Cohen, the study’s author, told the AP. (Climate Nexus)

AND FINALLY…

Trunk storage – African forest elephants are fighting climate change by contributing in surprising ways to natural carbon capture, according to the IMF’s Ralph Chami. As the elephants forage for food, they thin out young trees that are competing for space, water and light — by stepping on some and eating others. The untouched trees store more carbon than the trees that would have grown in their place. But their population had declined by more than 86% over three decades and the species was now considered critically endangered. Biologists estimate that if the population returned to its former size and they recovered their former range, it would increase carbon capture by 13 tonnes per hectare. Perhaps carbon offsetting investments — of increasing interest to energy companies — could soon start extending to elephant welfare. (Upstream Online)

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