Newsletters > CP Daily: Friday October 29, 2021

CP Daily: Friday October 29, 2021

Published 07:37 on October 30, 2021  /  Last updated at 07:37 on October 30, 2021  / /  Newsletters

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TOP STORY

COP26 PREVIEW: Nations under pressure to finalise carbon market rules in Glasgow

Nations are set to gather in Glasgow next week as the UNFCCC convenes its 26th Conference of the Parties, with pressure building on negotiators to agree a set of rules governing international emissions trading as private sector initiatives threaten to bypass the UN process.

AMERICAS

US Supreme Court accepts appeal to hamstring power sector CO2 regulations

The conservative-dominated US Supreme Court on Friday agreed to hear a legal challenge that would kneecap the EPA in regulating CO2 emissions or allow Congress to delegate such authority to the agency, in a potentially ominous sign for the country’s already minimal climate policy future.

California LCFS registers surprise surplus in Q2 as multiple credit generators post records

California’s Low Carbon Fuel Standard (LCFS) posted a credit surplus during the second quarter of 2021, according to state data posted Friday, bucking traders’ expectations of a deficit as renewable diesel (RD), renewable natural gas (RNG), and electricity volumes shot up.

WCI emitters massively unravel net short position, speculators boost net long

Regulated entities saw their California Carbon Allowance (CCA) net short position nearly halve this week amid reported exchange-for-physical deals, while financial entities saw their net length jump close to an all-time high, according to US Commodity Futures Trading Commission (CFTC) data published Friday.

ASIA PACIFIC

CN Markets: Offset eligibility rules double low-end CCER value overnight

Category 3 offsets in China’s carbon market double their value overnight after Tuesday’s government announcement that all CCERs will be eligible for ETS compliance use, with analysts saying the decision will likely soon start weighing on allowance prices.

Australia Market Roundup: Only 10% of latest ACCUs to non-ERF projects as Santos pushes for offset exports

Australian carbon credits traded at yet another record high on Friday amid limited spot supply, but 90% of the half a million units minted this week are already destined for the government coffers.

EMEA

Euro Markets: EUAs post modest monthly loss amid biggest price fluctuations since 2006

EUA prices ended little changed on Friday to post a modest month-on-month loss for October even as the market recorded its highest monthly volatility in more than 15 years, with the benchmark contract posting a high-low range of more than €11.

VOLUNTARY

Developer strikes VCM deal that includes corresponding adjustments

A project developer has secured a deal with a host country government to make corresponding adjustments (CA) to its national GHG inventory when a carbon outcome is sold on the voluntary carbon market (VCM).

INTERNATIONAL

Investors can benefit from larger role in carbon markets, report says

Rapidly growing carbon markets can be an effective tool for investors to manage climate-related risks and support companies in their transition journeys while also boosting portfolio values, provided there is greater scale and more robust governance standards, according to a report released on Friday.

Death of key Article 6 negotiator to weigh heavily at COP26

As delegates descend on Glasgow next week to attempt to finalise the Paris Agreement’s Article 6, the absence of one long-time carbon markets negotiator who died tragically earlier this year from COVID-19 will weigh heavily on their work.

COMMENT

Switzerland’s bilateral agreements set a poor precedent for ambition ahead of COP26

Switzerland’s recent bilateral crediting deals send no signal for decarbonisation at home, while for the countries hosting the emission reductions the agreements close some of their best available options to implement their NDCs and raise ambition in the future, according to researchers at NewClimate Institute.

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CONFERENCE

Prospero Events’ Carbon Trading and Markets 2021 virtual conference now takes place on Dec. 6-7. This virtual conference will gather C-level experts responsible for carbon & power trading, carbon markets & pricing, climate policy, ETS and market analysis from leading European energy companies as well as banks and other financial institutions. The conference will focus on discussing the ongoing challenges and trends in carbon markets and carbon trading insights. You can expect presentations and case studies from MOL Group, Enel, HeidelbergCement AG, Fortum, Berenberg, and more. Up to 90 minutes of Q&A and networking time.

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

Coal aplenty for the 20 – Leaders of the G20 are preparing to pledge to stop funding foreign coal-fired plants, according to a draft statement for this weekend’s summit seen by Bloomberg. The move would mark the biggest step governments have taken collectively to phase out the dirtiest fossil fuel and could reduce CO2 emissions by 230 mln tonnes a year. On domestic coal, the draft only pledges that leaders “will do our utmost to avoid building new unabated coal power generation capacity, taking national circumstances into account.”

…but dirty money keeps on flowing – G20 countries are still publicly financing overseas fossil fuel-related projects to the tune of $63 bln per year, a volume that is 2.5 times greater than their $26 bln in support to renewable energy, according to a new report from Oil Change International. “This continued support for fossil fuels from trade and development finance institutions counters G20 countries’ commitments under the Paris Agreement…as well as their 2009 commitment to phase out fossil fuel subsidies,” the report author’s wrote. The 2018-2020 average of $63 bln/year has dropped from the 2012-2017 average of $91 bln per year, but finance levels remain volatile. Roughly 51% flowed to natural gas projects, with finance for coal falling sharply in recent years. The report says that Canada, Japan, Korea, and China provided the most public finance for fossil fuels, while Germany, France, and Japan provided the most support for renewable energy.

But what do you really think? – Arnold Schwarzenegger said any world leaders warning that fighting the climate crisis would damage the economy were “liars” or “stupid.” “All of these countries that come and give speeches, ‘We are not going to go and lose jobs because of going green,’ and all this other stuff, they’re liars or they’re just stupid and they don’t know how to do it,” he told the BBC, adding that “it’s all about having the balls to do it.” Schwarzenegger did not name any particular countries. The former California governor said the environmental policies he enacted from 2003 to 2011 proved that “when you go green” it is “the best job creator.” (Business Insider)

AMERICAS

Fast track trading – Brazilian Congressman Marcelo Ramos, the deputy speaker of the country’s lower house, wants to fast-track a bill regarding compliance carbon markets ahead of COP26. Over 250 lawmakers declared their support for the motion, and Ramos and House Speaker Arthur Lira agreed to bring the proposal to a floor vote next week. Brazilian business groups have also expressed support for the bill, which aims to operationalise a cap-and-trade programme based on the country’s 2009 climate law. (The Brazilian Report)

Gargantuan Greens – The Green Party of Ontario released its costed climate plan on Thursday, which will form the basis of its platform in next year’s provincial election. The C$65-bln scheme would become cost-neutral by 2026, but would need $20 bln from the federal government. The Greens also proposed what would be the heftiest carbon tax in the country: a levy that increases by $25/tonne of CO2 each year until it reaches C$300/tonne in 2032. The Ontario Greens would introduce a system modelled after the federal tax, which returns 90% of carbon tax revenues to Canadians who file their taxes. (iPolitics)

Short in the swamp – The preliminary carbon reduction strategies developed by Louisiana Gov. John Bel Edwards’ Climate Initiatives Task Force fall far short of meeting his goal of net zero carbon emissions by 2050, the task force learned this week. In July, the group adopted seven high-level strategies for reducing GHGs, but they would still leave the Bayou State spewing 91.1 MtCO2 by 2050, compared to the 217 Mt estimate for 2018 and the 263.4-Mt business-as-usual case for mid-century. These strategies also do not meet interim goals of reducing emissions 28% by 2025 and 50% by 2030, which were set by Edwards when he announced the creation of the task force in 2020. Edwards is one of a handful of US state governors set to attend COP26. He’ll be joined by Washington state’s Jay Inslee, New Mexico Gov. Michelle Lujan Grisham, Hawaii Gov. David Ige, Illinois Gov. J.B. Pritzker, and Oregon Gov. Kate Brown. California’s Gavin Newsom announced Friday that he would not travel and would participate virtually due to unspecified family obligations. California Lt. Gov. Eleni Kounalakis will instead lead the state’s delegation, which includes more than a dozen lawmakers and top administration officials. (NOLA.com, AP)

Sold out – Almost every lump of coal that US miners will dig out of the ground next year has already been sold, as surging natural gas prices prompt utilities to burn more of the dirtiest fossil fuel. Peabody Energy, the top American supplier, has contracts for more than 90% of its coal from the Powder River Basin region next year and all of the power-plant fuel from its other US mines. And Arch Resources, the No. 2 producer, has lined up deals with utilities for all of its 2022 output from the basin at an average price that’s 20% higher than current spot prices. Demand for electricity is surging as the global economy recovers from the pandemic and winter approaches, driving natural gas prices to record highs. Even with coal miners boosting output next year, power producers are signing multi-year contracts for every tonne they can get. As global leaders converge in Glasgow next week for COP26, these lengthy supply deals are further evidence that the transition to clean energy is going to take some time. (Bloomberg)

ASIA PACIFIC

Alliance add – Singapore’s DBS Bank has joined the United Nations’ Net-Zero Banking Alliance, as part of its ongoing efforts to tackle climate change, Channel News Asia reports. As a signatory of the alliance, DBS will commit to transitioning GHGs emissions from its portfolios to align with the goals to net zero by 2050 or sooner. It also commits to annually publishing absolute emissions and emissions intensity in line with best practice as well as within a year of setting targets. DBS added that it will take a “robust approach” to the role of carbon credits in transition plans. The banking alliance is part of the Glasgow Financial Alliance for Net Zero (GFANZ) and is hosted by the UN Environment Programme Finance Initiative. Launched in April this year, the alliance currently includes 87 banks across 36 countries, representing more than 40 per cent of global banking assets amounting to around $65 trillion.

Thai 65 – Thailand’s prime minister, Gen Prayut Chan-o-cha, will attend COP26 where he will formally announce Thailand’s new pledge to achieve carbon neutrality by 2065, the Bangkok Post reports. The natural resources and environment minister, Varawut Silpa-archa, said Thailand’s delegates to the COP26 conference, led by Prime Minister Prayut, will submit the kingdom’s long-term development strategy to lower GHGs to the UNFCCC. This will effectively be the roadmap for how Thailand plans to go net zero within 44 years.

Green steel alliance – BlueScope and Rio Tinto have joined forces to explore options for low-emissions steelmaking at the Port Kembla Steelworks in the Australian state of New South Wales, Bluescope announced in a press release. The two companies have signed a Memorandum of Understanding MOU to research and design low-emissions processes and technologies for the steel value chain across iron ore processing, iron and steelmaking, and related technologies, according to the company.

EMEA

Who’s against nuclear? – There is mounting pressure on the European Commission to grant nuclear energy a ‘green’ label under the EU’s sustainable finance taxonomy, EurActiv reports. Previously expected sometime in October, the delegated act should be released “before the end of the year,” according to energy chief Kadri Simson. Already widely politicised, the introduction of nuclear power in the so-called sustainable rulebook has found even greater support among member states as a result of the ongoing energy price crisis which reignited the issue of supply security. 

NGMI – The Netherlands will likely miss climate targets set for 2030 unless more is done to curb GHGs quickly, the Dutch government’s climate policy adviser (PBL) said on Thursday. Emissions of CO2 in the eurozone’s fifth-largest economy will be 38-48% lower than in 1990 by 2030, the PBL said, based on current policies and measures announced for the years to come. That means that even in the most rosy scenario, progress will fall short of the EU-wide goal of cutting emissions by 55% at the end of the decade, and will even miss the government’s current own goal of lowering them by at least 49%. The Netherlands introduced up to €7 bln in new subsidies for sustainable energy projects and other measures to fight climate change last month. That promise came too late to be included in the calculations, but the overall effect would in any case not be enough to meet the 55% goal for 2030, the PBL said. (Reuters)

Bad bets – The surge in European energy prices continues to claim victims. France’s Le Figaro reports that the EDF Trading – trading arm of utility EDF – lost around €400 mln in bad bets in the power market. The losses resulted from gas and electricity prices spiking to record highs earlier this month on a mix of surging demand and reduced supply from Russia.

Bad spending – Germany spent €65.4 bln on environmentally harmful subsidies in 2018, with the majority going into energy and transport, the country’s Federal Environment Agency (UBA) has said. Almost half are spent on road transport and aviation, and they rose by €8 bln compared to 2012, UBA said. The transition to a new government presents a unique opportunity to reduce these payments and instead use the savings for climate-friendly investments, UBA president Dirk Messner said. “It is paradoxical when the state promotes climate protection with many billions and at the same time subsidises production and behaviour patterns that are harmful to the climate,” he added. UBA says that around half of environmentally damaging subsidies – around €30 bln – could be “cut or ecologically transformed.” In the energy sector, UBA lists tax breaks on power prices for industry and power generation as some of the largest harmful subsidies. In the transport sector, the tax break on diesel fuel, which costs more than €8 bln alone, and support for commuters (€6 bln) are among the largest items. UBA notes that some environmentally harmful subsidies can only be reformed at EU level, such as the tax breaks on aviation fuel and international flights, which add up to a combined €12 bln. (Clean Energy Wire)

VOLUNTARY

Integrity sought – The multi-stakeholder Voluntary Carbon Markets Integrity Initiative (VCMI) has published a roadmap, setting out the steps it will take to enable an inclusive VCM that is “inclusive and leads to increased ambition on climate change.” The buyer-side initiative draws feedback from responses to its July consultation and sets out the critical issues it will address, including ensuring claims represent credible climate action, determining the changing balance between reduction and removal credits, preventing double counting and claiming, ensuring inclusion of the rights and voices of host communities, and assessing how the VCM could align with the regulatory environment and any future Article 6 rulebook. Read Carbon Pulse’s article about the VCMI.

TC does it – Canadian pipeline operator TC Energy this week announced a 2050 net zero target from its operations, with an interim goal of reducing the carbon intensity of these operations 30% by 2030. It plans to obtain low-carbon energy sources to support its operations, invest in other forms of low-carbon energy, and use carbon credits and offsets. Beside this, the company plans to develop and implement digitalisation in operations, manage emissions, and reduce methane discharge, leaks, and flaring from normal operations. (Nasdaq)

AND FINALLY…

Out of thin air – The US Air Force (USAF) is studying a process that could allow the manufacture of a carbon-neutral aviation fuel anywhere on Earth using only CO2 from air and water, coupled with renewable energy. The USAF is looking for ways to make its bases at least partly independent of outside fuel sources by means of a deployable, scalable, synthesis process that does not need a large number of specialists to operate. The current pilot of the technology developed by tech company Twelve is expected to be completed by Dec. 2021. If the technology is practical for military applications, it will mean that the USAF will potentially be able to produce synthetic fuel onsite without the need for coal, natural gas, or biofuel. “It would be really interesting if the US Air Force’s need to protect and shorten its aviation fuel supply lines leads to dramatic innovation and cost reduction in fully net-zero synthetic, renewable, direct-air-capture-based jet fuel. It very much fits historical patterns,” Chris Bataille, Associate Researcher at the Institute for Sustainable Development and International Relations in Paris, said on Twitter in response. (New Atlas)

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