CP Daily: Monday September 27, 2021

Published 01:50 on September 28, 2021  /  Last updated at 01:50 on September 28, 2021  /  Newsletter  /  No Comments

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

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TOP STORY

German parties prepare to jostle for coalition standing following close election

Germany is set to head into coalition negotiations once again after exit polls suggested Sunday’s election failed to determine a clear winner, with the tension between energy prices and legal obligations under the country’s Climate Protection Law due to be key sticking points in determining who will rule Europe’s biggest economy.

EMEA

Euro Markets: Carbon sets new records as energy prices surge

European carbon prices extended Friday’s record highs in on Monday amid solid gains across the energy complex, as equities rallied and API2 coal rose to its highest in 13 years.

“Not acceptable” if Russia imposes carbon price only on exporters -EU official

It would not be permissible for Moscow to only impose a carbon tax on exports as a means of shielding Russian firms from the impact of the EU’s border adjustment mechanism (CBAM), a senior EU official said on Monday.

Commodities firm Gunvor parts ways with emissions trading boss

Gunvor’s head of emissions has parted ways with the trading house, joining the wave of wide-reaching staffing changes this year as carbon market experts become hot commodities themselves amid soaring permit prices.

VOLUNTARY

VER demand to swell 50 times over to hit net zero -analysts

Demand for voluntary emissions reductions (VERs) will need to skyrocket by 2050 to hit net zero emissions, with carbon neutral liquified natural gas potentially providing an additional growth channel for the offset market, analysts at a major investment bank said Friday.

VCM Report: CORSIA-eligible offset prices retrace as nature-based units hold firm

Standardised voluntary emissions reductions (VER) prices moved in opposite directions over the past week, with CORSIA-eligible units reversing weeks of gains as nature-based offerings largely either slightly increased or decreased in value.

AMERICAS

NA Markets: CCA, RGA prices hit new all-time highs amid continued speculative interest

California Carbon Allowances (CCA) and RGGI Allowances (RGA) set fresh all-time highs on Monday as a combination of speculative interest, near-term fundamentals, and bullish expectations caused prices to surge.

California gasoline consumption stagnates near 1.2 bln gal, as diesel usage hits 10-year high

California gasoline usage dropped slightly month-on-month in June, while drivers’ usage of the fuel remained within recent trends compared to pre-pandemic levels, according to state data released Monday.

ASIA PACIFIC

Australia’s net zero target should include agriculture but offsets likely needed, report claims.

Australia’s agricultural sector should not be exempt from a nationally-set target to reach net zero emissions by 2050, according to a report released on Monday by an energy policy think tank.

Australia Market Roundup: Analysts downplay near-term impact of net zero goal, as over 50 projects earn new ACCUs

As the likelihood increases that Australia will commit to a 2050 net zero target ahead of the Glasgow COP talks, analysts said Monday such a pledge would be unlikely to have a near-term impact on domestic carbon credits.

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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

Walk the talk – The International Energy Agency announced today that it is committing to reduce GHGs from its activities to net zero by 2024, aligning itself with the recommendations of its recent report Net Zero by 2050: A Roadmap for the Global Energy Sector. “As I have pointed out repeatedly, it’s not enough to simply talk about net zero – you have to act. That’s what we’re doing by putting in place practical measures that follow the recommendations of our Roadmap. We are determined for the IEA to reach net zero by November 2024 – the 50th anniversary of the founding of our Agency,” said Fatih Birol, IEA Executive Director. Based on a detailed assessment of the emissions footprint of its operations and in accordance with the highest international standards, the IEA is pursuing a concrete and practical action plan to reduce emissions quickly and as close to zero as possible. This will include all emissions from the use of IEA offices, official missions, staff members’ commutes, procurement of goods and services, waste generation, water use, and fugitive emissions from air conditioning and other areas. For any residual emissions the Agency may still have in 2024, it will purchase carbon credits with the highest level of environmental integrity.

EMEA

Taxonomy advance – The European Parliament’s environment committee rejected three motions on Monday to block the first part of the EU’s green taxonomy proposal on grounds that it was not aligned with existing EU laws or should have included nuclear energy and gas power plants as green investments. The European Commission is due to publish a second proposal in the coming months, confirming whether the taxonomy will label investments in nuclear and gas as green. (Reuters)

It’s not the green – Recent increases in global natural gas prices are the result of multiple factors, and it is inaccurate and misleading to lay the responsibility at the door of the clean energy transition, IEA Executive Director Fatih Birol said in a statement on recent energy market developments. The IEA said it believes that Russia could do more to increase gas availability to Europe and ensure storage is filled to adequate levels in preparation for the coming winter heating season.

Metaux blow – Having already led to factory curtailments, rising power prices could lead to metal producers moving operations away from Europe and undermine EU carbon-cutting plans, non-ferrous metals industry association Eurometaux has warned the European Commission. Non-ferrous metals, such as aluminium, copper, nickel, and silicon, are more electricity-intensive to produce than any other material, Eurometaux said. (Reuters)

Oslo mandate – The world’s biggest owner of publicly traded stocks, Norway’s sovereign-wealth fund, is about to get the political go-ahead to insist that all companies in its portfolio have clear targets for cutting CO2 emissions. Norway’s Labor Party, which this month won elections, has made clear it wants to embrace more aggressive environmental policies. The $1.4 trillion fund should now commit to net zero CO2 emissions by 2050, Espen Barth Eide, Labor’s climate spokesman, told Bloomberg.

Oily hands – NatWest is under scrutiny from campaigners due to it financing fossil fuel projects while sponsoring the COP26 climate summit. The firm is the banking sponsor of the conference but was still providing underwriting and loans to energy companies expanding in the Arctic as recently as last year. According to a Reclaim Finance report detailing the funding of fossil fuel expansion in the Arctic, it backed projects to the tune of $539 mln. Banks funnelled $314 bln in loans and underwriting to Arctic oil and gas expansionists from 2016-20 in total, so the COP26 sponsor’s half a billion in lending and underwriting is well down the list of lenders to the sector. A NatWest spokesperson said the banking group “has strict environmental lending policies in place”, including in relation to Arctic exploration and its total financing pool has declined considerably. “Oil and gas makes up less than 0.7% of our total lending and we have committed to stop lending and underwriting to major oil and gas producers unless they have a credible transition plan in line with the 2015 Paris Agreement by the end of 2021.” The bank, formerly known as RBS and led by Alison Rose, said its total exposure to the oil and gas sector decreased by £700 mln to £3.5 bln in the first half of 2021, due to net repayments and the tighter lending criteria now in place for this sector. (City AM)

ASIA PACIFIC

Changing gears – China may replace its 2017 green car credit system with a new policy focusing more broadly on reducing carbon emissions, and is considering an ETS as one option, Reuters reports, citing industry sources.

Ain’t gonna do it – Australian PM Scott Morrison refused to commit to phasing out fossil fuels as a major climate conference approaches, while his deputy doubled down on opposing targets for net zero. Australia, the world’s top coal and a major gas exporter, is under growing pressure to come up with emissions reduction targets ahead of November’s COP26. The IMF called on Australia to set a “time bound” target to reach net zero emissions on Friday, when the country’s treasurer warned that Australia must brace for much higher borrowing costs if it fails to commit to that target by 2050, as many peers have done. In interviews with Australian media after a summit in Washington, Morrison said his government was still working on its emissions plans, declining to commit to curbing fossil fuels that account for a major part of Australia’s export revenue. He told broadcaster SBS that he was not prepared to pull back any fossil fuel industries immediately. “We don’t have to, because that change will take place over time,” he said. “We are working on the transition technologies and fuels and the ultimate technologies that will be there over the next 20, 30 years that can get us to net zero… This doesn’t happen overnight.” Morrison also this weekend said he may travel to Glasgow for COP26 next month. His deputy prime minister, climate change sceptic Barnaby Joyce, then dug in on Sunday against a net zero target. (Reuters)

Asian price – Asia needs to adopt a carbon pricing mechanism to help accelerate its transition towards lower emissions, a senior company official at oil major BP said on Monday, according to Reuters. Asia could also accelerate its move to lower carbon emissions by ramping up the use of biofuels and coupling natural gas consumption with technologies like CCUS, the official added.

Malay way – Malaysian PM Ismail Sabri Yaakob on Monday tabled a new five-year economic plan, boosting infrastructure spending, and committing to a carbon tax to help reach net zero emissions by 2050, Reuters reported. The government also pledged to stop building coal-fired power stations, as it strives to meet its revised NDC to reduce emissions intensity of GDP by 45% in 2030, the premier said. Read Carbon Pulse’s report from last week on the country’s plans for a a domestic ETS and guidelines for a voluntary carbon market.

Cross-continent cooperation – The US is actively working with India to realise its ambitious goal of deploying 450 GW of renewable energy capacity by 2030, including through the recently launched Climate Action and Finance Mobilization Dialogue, led by the US Special Presidential Envoy for Climate, and the revamped Strategic Clean Energy Partnership (SCEP), led by the US Secretary of Energy. Both of these comprise the two tracks of the US-India Climate and Clean Energy Agenda 2030 Partnership, according to a White House fact sheet. Under the SCEP, the US Department of Energy, together with Indian counterparts, launched a new public-private Hydrogen Task Force as well as a Biofuels Task Force.

AMERICAS

Taxing times – US Senate Democrats are developing a carbon tax proposal that could potentially be used to offset some of the costs of a sweeping social-spending bill as well as direct cash payments to households, according to a key lawmaker. “It’s projected that making polluters pay – when combined with clean energy tax credits – would lower the cost of clean electricity for Americans,” Senate Finance Committee Chairman Ron Wyden (D) said in a statement to Bloomberg on Friday. A “substantial portion” of the revenue generated from a carbon tax would be disbursed to Americans in the form of cash payments, Wyden said. That could help increase public support for the tax, but would also mean less money to offset the cost of the up-to-$3.5 trillion so-called reconciliation bill. That bill, incorporating the bulk of President Joe Biden’s long-term economic agenda, includes overhauling climate investment and directing money into health and education programs. Some Senate Democrats think that Senator Kyrsten Sinema (D) is open to the idea after she raised global warming as a key concern during an interview with the Arizona Republic last week. But her Democrat colleague Senator Joe Manchin on Monday raised a red flag over the idea. “I just heard about that,” he told reporters Monday when asked about the new push for the carbon tax. “Any type of a tax is going to be passed on to the people.” “Now if a tax is going to be beneficial to help something and give us more research and development and innovation and technology, it’s something to look at,” he said. But Manchin said he doesn’t believe that would be the case for the carbon tax under discussion, at least as it’s been explained to him so far. Negotiations on are ongoing on Capitol Hill.

Groaning growers – The industry association Fertiliser Canada released a report Monday claiming that a 20% reduction in fertiliser use would cost farmers C$48 bln between 2023 and 2030. The report is a response to Canada’s climate plan that calls for a 30% reduction in emissions from fertilisers by 2030. The analyses, performed by chartered accountancy group MNP, focus on production of corn, canola, and wheat, and it assumed that farmers do not adjust farming practices in response. Instead, farmers would reduce domestic and export productivity that could significantly curtail Canada’s contribution to the global food supply. The report notes that farmers could adopt ‘4R’ nutrient management techniques that involve applying the right levels of fertilisers at specific timeframes to optimise yields instead of reducing fertiliser use.

Premier payment – The US Department of Agriculture (USDA) on Sep. 24 awarded $7.5 mln to a Regional Conservation Partnership Program led by the American Coalition for Ethanol, which will help secure farmers premier access to low-carbon fuel standard (LCFS) markets through the adoption of USDA climate-smart agricultural practices. According to the USDA, the ACE-led project will create a strong market-driver for climate-smart agricultural practices, such as no-till, cover crops, and nutrient management, for farmers in the grainshed supplying a farmer-owned ethanol plant in South Dakota. The agency estimates the project will generate an estimated $18.5 mln in new revenue annually in the RCPP project area. (Ethanol Producer Magazine)

Still in their pocket – Former Enron natural gas trader John Arnold warned the US needed to ensure a smooth transition to reasonably priced clean energy to decarbonise the power sector, while efforts to curb carbon-intensive sources could lead to price spikes in the near term. Arnold said on Twitter that “very high oil and gas prices risk a voter backlash against decarbonisation policies, which are vital to a cleaner future.” He added that it was not feasible to build enough electric vehicles, renewable energy assets, or batteries to change fossil fuel use in the near term, and said rising energy costs in the EU could serve as a wake up call for the US to ensure environmental policies do not led to price spikes.

VOLUNTARY

(See VCM Report)

SCIENCE & TECH

Out of Africa – UK firm Xlinks has laid out a $21.9 bln plan for the world’s longest power link bringing extra supplies to Britain from renewable sources in Morocco. The 3,800-km project would take power from 10.5 GW of large-scale solar and wind farms to potentially supply 7 mln British homes. Xlinks says it’s seeking £48/MWh contract-for-difference funding to lay the cable over 2025-29. (Bloomberg)

AND FINALLY…

Giving kelp a little help – A new prototype of a small, solar-powered robotic vessel recently started sailing in the Pacific Ocean, pulling an underwater rack filled with seaweed. The startup developing the technology, called Phykos, says each platform holding the fast-growing kelp may be able to capture as much CO2 as 250 trees – and though the approach still needs to be proven, the company thinks that it could be a viable way to quickly sequester carbon by sinking the seaweed to the ocean floor. The startup’s founders met at X, Google’s moonshot factory, before deciding to launch their own company. Seaweed along coastlines already captures an estimated 173 Mt of CO2 each year as it grows; some of that seaweed eventually sinks, trapping the carbon at the bottom of the ocean. Phykos wants to replicate the same process in the open ocean, where kelp doesn’t grow, to vastly increase seaweed’s global level of carbon sequestration. The tech is modular: with the units that float on the surface, each the size of a small boat, and the lines of kelp underneath roughly the size of a single-family house. After seaweed “starts” from nurseries planted on the lines, the vessels will navigate out to the open ocean. Software on each vessel is designed to steer toward the best areas for growth, moving throughout the year, and to automatically avoid areas like shipping lanes. Then it will harvest itself. Unlike some types of kelp that float – picture the seaweed along California coastlines, which has small, round air-filled pockets to keep it near the surface – the company plans to work with species that naturally sink. A scale built into the platform will weigh the seaweed after each harvest to help calculate how much carbon has been captured. (Fast Company)

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