CP Daily: Tuesday September 28, 2021

Published 01:37 on September 29, 2021  /  Last updated at 01:45 on September 29, 2021  /  Newsletter  /  No Comments

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

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TOP STORY

ANALYSIS: Experts expect Japan to restrict voluntary offset access as it beefs up domestic mechanisms

Japan is likely to impose restrictions on the use of voluntary carbon credits from abroad as it wishes to steer offset demand towards domestic units that will help it meet its Paris Agreement obligations, according to observers.

INTERNATIONAL

Carbon trading on the agenda as Italy musters governments for pre-COP climate meeting

Ministers from up to 50 nations will gather in Milan later this week to thrash out a way forward for November’s crunch UN COP26 climate talks in Glasgow.

African nations need to get ready for Paris’ market-based Article 6, say officials

The Paris Agreement’s Article 6 will “look very different” for carbon markets compared to the CDM under the predecessor Kyoto Protocol, said speakers at Africa Climate Week on Tuesday, emphasising that the region will need to take several steps to prepare.

Samsung to launch EU carbon ETF

The asset management arm of multinational manufacturing conglomerate Samsung is launching a new Korean-listed exchange traded fund to track European carbon prices.

AMERICAS

Brazilian business groups ask for compliance carbon market as legislation moves through Congress

A coalition of more than 100 Brazilian businesses called on Monday for the implementation of a regulated carbon market in the country, as lawmakers called for public hearings on a bill to operationalise a national cap-and-trade system.

California offset prices rise before compliance deadline, as discounts remain near historic level

California Carbon Offset (CCO) prices are rising ahead of the upcoming November WCI compliance deadline amid surging allowance values and an uptick in demand, but the discount to carbon permits remains near all-time highs, data shows.

LCFS Market: California prices tumble below $160

California Low Carbon Fuel Standard (LCFS) credit values exacerbated their months-long retracement on Tuesday, as traders continued to cite rising volumes of renewable diesel (RD) as the impetus for the bearish pressure.

RGGI outlines schedule for upcoming programme review process

The 11 RGGI states are hoping to finish the upcoming programme review of the power sector carbon market by 2023, with officials aiming to complete policy scenarios by mid-2022, according to documents published Tuesday morning.

New speculator enters the RGGI market as financials’ interest grows in the Northeast US carbon scheme

A Connecticut-based commodities trader opened a RGGI CO2 Allowance Tracking System (COATS) account on Tuesday, marking the fifth speculative firm to open an account this month.

EMEA

Euro Markets: EUAs post biggest loss in five weeks as gas market pares gains

EU carbon prices wiped out early gains on Tuesday as natural gas prices tumbled on news of increased flows from Russia and speculation grew over whether EU member states would act to counter the energy cost crisis.

VOLUNTARY

VER ownership rights in focus in new Belize forest carbon credit deal

A US-based green group this month struck a deal to preserve a section of the Belizean rainforest, with the agreement attempting to balance government and private ownership rights to voluntary emissions reductions (VERs) generated from forest carbon projects.

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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

Visa headaches – The world’s poorest countries have said they may struggle to meet visa requirements and cover all COVID-19 quarantine costs for November’s COP26 climate summit in Glasgow, raising concerns that some might not be able to attend in person. Britain said last week that government ministers travelling to COP26, plus two staff members, would be exempt from quarantine requirements when they arrive. But other delegates from countries on Britain’s coronavirus “red list”, such as Angola, Ethiopia, and Haiti, must quarantine in a hotel for up to 10 days before attending the summit. The government has said it will cover the cost of hotel quarantines for delegates from poorer nations. Some countries’ delegations will not be led by ministers, meaning they would need to visit a visa centre to complete their application to attend COP26. Delegates from 25 of the poorer countries would have to leave their territories to go to visa centres in another state – a challenging process during the pandemic. (Reuters)

Dirty flyers – The CO2 emissions from five of Europe’s biggest airports combined surpass those of the whole of Sweden, an airport emissions tracker shows. Largely tax-free, the total emissions from London Heathrow, Paris Charles de Gaulle, Germany’s Frankfurt, Amsterdam Schiphol, and Madrid Barajas amount to 53 Mt of CO2. In 2020, Sweden emitted some 45.4 Mt, fewer than the year before. The figures come from The Airport Tracker, an online tool illustrating emissions from aircraft departing from airports around the world. (euronews)

Shipping standards – Danish shipping firm A P Moller-Maersk has signed three separate cooperation framework agreements with China Classification Society (CCS) that will see the two companies partner on carbon neutral technologies and standards, Bunkerspot reports.

EMEA

Little help please – The EU’s red-hot carbon market could be used to mitigate the impact of soaring energy prices on the most vulnerable consumers, EU Energy Commissioner Kadri Simson said. Revenue from EUA auctions has surpassed €20 bln so far this year as the price of pollution soared with gas and power prices. While national governments are obliged to use half of the funds for climate purposes, they are also allowed to use them to financially support middle- and low-income households, Simson told Bloomberg in an interview. “Any measures, of course, need to be in line with the state aid and internal market rules, but there is no limit to how much EU ETS-related funding can be spent on addressing social impacts,” she said. “In the current context of higher than anticipated revenues, this can be done without jeopardizing investment in clean-energy technology and innovation.” The EU also wants to set up a new €72 bln social fund, financed by revenues from the planned extension of emissions trading to heating and transport fuels from 2026. Its aim will be to shield the poorest citizens, micro-enterprises, and transport users in the shift away from dirty energy. EU leaders are scheduled to discuss the surge in energy prices at their next summit on Oct. 21-22.

Target at risk – Higher carbon prices will hit people’s pockets and make it harder for the European Central Bank to reach its inflation target if governments don’t use the extra revenue well, ECB President Christine Lagarde said Tuesday. She said governments should use the additional revenue from costlier carbon to compensate people hit by the rising cost of fossil fuels and to foster investment in green sources of energy. “There is a risk that higher carbon pricing might reduce purchasing power and lead to relative price changes that push down underlying inflation,” Lagarde added. She cited an academic paper, due to be presented at the ECB’s conference on Wednesday, showing that carbon taxes in euro area countries have raised headline inflation, which includes energy, but capped growth in other prices.

Methane MEPs – European MEPs are calling for binding reduction targets on methane emissions to reach EU climate goals and improve air quality. The Parliament’s ENVI Committee today adopted their report on the EU Strategy to reduce methane emissions, with 61 votes for, 10 opposed, and 7 abstentions. MEPs want the Commission to propose a new law with binding measures and methane reduction targets, covering all sectors to significantly reduce methane emissions in the EU by 2030 in line with the Paris Agreement. They also want a binding global agreement on methane at the COP26 meeting in Glasgow; mandatory monitoring, reporting, and verification (MRV) for all methane emitting sectors; and mandatory leak detection and repair (LDAR) programmes, covering the full supply chain in the energy and petrochemical sectors. MEPs are urging member states and the Commission to introduce effective and sustainable measures to address methane emissions from agriculture, while ensuring that food continues to be produced in the most environmentally sustainable locations and that production is not just moved outside the EU. For the waste sector, they want the Commission to set binding EU targets for commercial and industrial waste and to propose targets to cap the generation of residual waste in the review of the Waste Directive and Landfill Directive. For energy, the MEPs want to phase out all fossil fuels in the EU as soon as possible in order to reach climate neutrality by 2050 at the latest. The report is expected to be voted at the plenary session 18-21 October 2021 in Strasbourg. Methane is the second biggest contributor to climate change after carbon dioxide (CO2), accounting in Europe for 10% of total greenhouse gas emissions. The agricultural, waste and the energy sectors are responsible respectively for 53%, 26% and 19% of methane emissions in the EU according to the European Environment Agency.

Steely secret – German steelmaker ThyssenKrupp plans to implement a carbon surcharge, according to a customer presentation obtained by Argus. In a slide marked confidential, the company refers to a carbon price of €45.93/tonne and says it produces 2.1t of CO2 for every tonne of crude steel, giving it a total carbon cost of €96.45/t of crude steel. As it has to buy 20% of its emissions allowances, this equates to a cost of €19.29/t of steel – a cost that it will look to pass on to customers, who confirmed to Argus that the mill has been proposing a carbon surcharge in negotiations over the past few weeks. Tata Steel Europe already implemented a €12/t carbon surcharge, recently having increased it to €16/t, while China Steel Taiwan said it would introduce one for 2022.

Standing Ovako-tion – Separately, Sweden’s Ovako announced it will offer carbon-neutral steel and plans to use green hydrogen to achieve that. The decision to update its business model from 2022 follows investment accords by several larger blast furnace-based steel producers to develop new direct reduction iron modules and make environmental upgrades. This comes on top of a broader aim to increase scrap-based steelmaking and lower emissions from the sector, which is the world’s second-largest industrial emitter. Ovako is charging a specific “climate” premium from January to reflect its already low emissions and € 100 mln in investments planned in electrolyzers and hydrogen infrastructure by 2030 or earlier. The premium price, which Ovako did not disclose, will also track rising EU carbon allowance prices. (Platts)

Sweet Chariot – London-listed company Chariot is exploring a potential 10 GW green hydrogen development in Mauritania, according to Upstream. Chariot revealed this week it has signed a memorandum of understanding with the Mauritanian government to progress the initiative, named Project Nour. It covers an exclusive onshore and offshore area, totalling about 14,400 square kilometres, and Chariot intends to carry out pre-feasibility and feasibility studies for producing hydrogen powered from both solar and wind resources.

AMERICAS

Cancelled commitment – US House Speaker Nancy Pelosi reversed her commitment to move the Democrats’ $3.5 trillion climate-focussed reconciliation package and the bipartisan infrastructure bill forward together, with a House vote on infrastructure looming this week. The Democratic factions tug-of-warring on the party’s two major legislative packages issued stark signals on Monday, as key progressives vowed in an op-ed that they would vote on the infrastructure bill only after the reconciliation package is passed. On the other hand, Moderates stood firm that it’s “time to send the Bipartisan Infrastructure Bill to the President’s desk,” and were less than thrilled about any progressive ultimata to force through their reconciliation package or delay the infrastructure bill. Meanwhile, environmental campaigners Sunrise Movement on Tuesday blasted Pelosi’s decision as a “betrayal” and saying it is an example of why Democrats will lose their Congressional majority during the 2022 mid-term election. (Politico)

Caisse closed – The Caisse de depot et placement du Québec (CDPQ) wants out of oil production by the end of 2022 and will devote a C$10 bln envelope to decarbonise carbon-emitting industrial sectors. The fund that serves as a nest egg for Quebecers made the announcement Tuesday as part of the unveiling of its 2021 climate strategy, where it now aims to reduce the carbon intensity of its portfolio per dollar invested by 60% below a 2017 baseline by 2030. In 2017, CDPQ set a carbon intensity goal of 25% for the 2017-25 period, and has already exceeded that target with a 38% reduction as of 2020. (Canadian Press)

Clean fuel facade, part I – Canada’s proposed Clean Fuel Standard (CFS), set to come into force in Dec. 2022, is facing pushback from a coalition of 26 clean fuel industry advocates that are arguing it is out of step with Canada’s goals to achieve net zero emissions, Reuters reports. The clean fuel lobby says the CFS regulation puts too much emphasis on giving credits for emissions cut during the “upstream” oil production and refining process, and does not incentivise fuel suppliers to switch to lower-carbon sources of energy like biofuels, hydrogen, and electricity. Instead, it wants the government to introduce a limit to how much fuel suppliers can rely on upstream credits to meet their CFS obligations, similar to EU regulations.

Clean fuel facade, part II – A group of US Democratic lawmakers called on President Joe Biden to halt a plan to slash the amount of biofuels that oil refiners must blend into their fuel, according to a letter dated Monday. The move, which the lawmakers argue threatens Biden’s pledge to protect the US farm economy, follows a Reuters report last week that Biden’s administration is considering big cuts to the nation’s biofuel blending requirements under the Renewable Fuel Standard (RFS). While no official announcement has been made, news of the plan sparked uproar among farming and biofuel advocates, who benefit from the requirements that have helped create a multi-billion-gallon market for their products. (Reuters)

Ford funds – Ford Motor Company announced plans on Monday to invest $11.4 bln to accelerate their electric vehicle manufacturing, the single largest investment in the company’s history. In a joint venture with its main battery cell supplier, South Korean company SK Innovation, the companies plan to build three electric vehicle battery plants along with a plant to produce electric pickup trucks. The factories in Tennessee and Kentucky are expected to start production in 2025, and the Tennessee manufacturing campus is designed to be carbon neutral and send no waste to landfills. According to Ford, the move will create 11,000 jobs and enable the company to produce more than 1 mln electric vehicles per year. (Climate Nexus)

ETS progress – The Colombian government presented its Climate Action Law to congress on Tuesday, raising the legal status of the goals outlined in the country’s NDC that was submitted to the UNFCCC last year and aims to cut GHG emissions by 20% below business-as-usual levels by 2030. “The bill provides legal security to sectors and citizens by raising the country’s climate goals to legal status,” said Minister of Environment and Sustainable Development Carlos Eduardo Correa in a statement. Earlier that day, Nicolas Galarza, Vice Minister of Environment, said in a session at Africa Climate Week that the climate bill includes grounds to regulate and develop carbon markets in the country. “We are committed and fully believe that we need to promote fair carbon pricing schemes that reflect and internalise social and environmental costs,” he said. Columbia already has a CO2 tax of roughly $4.00/tonne and has been considering an emissions trading system since 2018.

ASIA PACIFIC

Alarm! – As a severe power crunch roils China’s northeastern industrial heartland, senior officials face mounting pressure from alarmed citizens to ramp up coal imports thick and fast in order to keep lights on, factories open, and even water supplies flowing, Reuters reports. With electricity shortages sparked by scant coal supply crippling large sections of industry, the governor of Jilin province, one of the hardest hit in the world’s No. 2 economy, called for a surge in coal imports, while a power company association said supply was being expanded “at any cost”.

Steel seal – Tata Steel has become the first steel producing signatory of the Sea Cargo Charter as part of its sustainable initiatives to reduce GHG emissions, according to Financial Express. The Indian company is the 24th organisation to join the association, which is working to reduce environmental impacts of global seaborne cargo.

VOLUNTARY

Southern discomfort – The shaping of the voluntary market has mostly been shaped by the demand side, but supply side/developing country concerns must be heard as well, according to the Voluntary Carbon Markets Global Dialogue, which on Tuesday released a draft set of recommendations.

Locus of Kontrol – Smart buildings technology company Kontrol Technologies on Tuesday launched its carbon credit monetisation program designed to accelerate the transition to net zero emissions and meet corporate sustainability mandates through its technology platform. In a press release, Kontrol said it will initiate energy efficiency projects that deliver verifiable and measurable energy savings over a 10-year period which will produce a corresponding GHG reduction. For each tonne of avoided emissions, Kontrol will seek to establish one equivalent carbon credit which will then be monetised in the voluntary emissions reduction (VER) market.

AND FINALLY…

From Mobil to mobile – Oil major ExxonMobil has parted ways with Keith McCoy, its lobbyist who divulged aspects of the company’s climate strategy in a secretly recorded video, E&E News reports. It’s unclear when McCoy left the company or if the oil major is still providing him legal representation related to congressional investigations spawned from his recorded comments. The company disputed McCoy’s comments, which undermined Exxon’s public support for a carbon tax, and his description of lawmakers as fish who he could “reel” in. McCoy’s comments contradicting his employer were made in May to a Greenpeace UK official. The climate activist was posing as a headhunter for a Middle East energy fund that he claimed was looking to invest in the US.

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