CP Daily: Wednesday November 10, 2021

Published 02:12 on November 11, 2021  /  Last updated at 02:12 on November 11, 2021  /  Newsletter  /  No Comments

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

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COP26

‘Game-changing’ China-US declaration promises work on near-term GHG curbs

China and the US pledged stronger cooperation to curb CO2 and methane emissions in the 2020s in a joint statement late on Wednesday, a move some experts said drastically boosted the chances of a good COP26 deal in Glasgow and more climate ambition within the next few years.

ANALYSIS – Opposition to EU’s border measures eases as ‘penny drops’, but tough road lies ahead

Countries facing exposure to the EU’s planned carbon border adjustment mechanism (CBAM) are progressively easing their opposition as they envisage laying out comparable policies to avert carbon leakage, but the bloc still faces a difficult challenge in implementing and defending the divisive measure or selling it to its major trading partners.

Mercuria secures deal with Ghana to develop Paris Agreement carbon credits

Trading house Mercuria has signed an MoU with Ghana to help operationalise Article 6 of the Paris Agreement, including driving project development in a number of sectors across the economy.

Ukraine grapples with carbon pricing as pledges risk running hollow

The launch of a Ukrainian carbon market appears uncertain as the country examines several options to put an adequate price on emissions while averting political opposition and the EU’s border measures.

COP26 Roundup: Day 9 – Nov. 10

Midway through the second week of COP26, and much is still left to be done. We follow the latest developments here and update continually throughout the day.

AMERICAS

Washington state carbon market will not be linked from outset -govt official

Washington’s WCI-modelled cap-and-trade system will not have any linkages when it commences from 2023, and it is uncertain when or even if the jurisdiction will ever join another programme, a state government official said this week.

CCAs notch new record as decades-high US inflation reading to mean higher 2022 WCI floor

The 2022 auction reserve price for the WCI cap-and-trade programme will come in above previous expectations after October inflation surged to the highest level in more than three decades, though traders said a new all-time high in California Carbon Allowances (CCAs) above $33 on Wednesday was not related to the data release.

California dispenses 1.5-yr low in compliance offsets, though CCO-0s jump

California divvied out the fewest number of compliance offsets this week since spring 2020, although the number of California Carbon Offsets (CCOs) that lost their invalidation period swelled for the second consecutive issuance, according to data from state regulator ARB published Wednesday.

ASIA PACIFIC

Power market reform paves way for tense inclusion of industry in China ETS

The power pricing reform announced by China last month has seen industrial electricity prices rise by up to 75% in some regions, leading some analysts to question whether heavy industry such as aluminium production should be brought into the national emissions trading scheme.

EMEA

Euro Markets: EUAs surge to 5-week high on technical buying, shrugging off weaker energy

EUAs surged above a number of strong resistance levels to a five-week high on Wednesday, even as natural gas prices dropped more than 10% amid growing flows from Russia.

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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

AMERICAS

Canadian CFS delay – Canada will not finalise its national Clean Fuel Standard (CFS) regulation before next spring, missing a December target, the country’s environmental agency said Wednesday. Environment and Climate Change Canada (ECCC) still expects trading and enforcement of the federal CFS to begin as planned in early 2023, but this year’s snap election and subsequent cabinet change required a delay that will shorten the amount of time for participants to generate compliance credits ahead of the 2023 start, the agency said. Additionally, ECCC on Wednesday also proposed limiting CFS credits to sources more directly tied to Canada’s fuel supply and not required by other legislation. That proposal would narrow eligible CCUS projects to only those associated with fossil fuel production and in excess of other requirements. Renewable fuel projects with CCUS components, including foreign projects, would instead gain benefits through an associated reduction in the carbon intensity of their products. Biofuel groups in particular worried that ECCC’s original draft language would allow too much credit generation from sources unrelated to liquid transportation fuels. (Argus)

Regan on regulations – US President Joe Biden’s administration will strengthen its proposed limits on auto and truck emissions, EPA chief Michael Regan said Wednesday, addressing complaints that the plan announced last summer is too weak. The White House this week is beginning an interagency review of the EPA’s drafted final rule to curtail emissions from cars and light trucks, with a goal of imposing the new requirements in December. The plan outlined in August would translate to the most stringent federal GHG emissions limits by model year 2026. But environmentalists and administration officials warned that actual, real-world emissions reductions could be undercut by provisions in that industry-backed proposal, including double counting of electric vehicle sales and so-called flexibilities that give extra credit for technologies that make cars more fuel efficient but don’t necessarily show up in tailpipe readings. Additionally, EPA officials are already working to develop new emissions limits for power plants under the shadow of the Supreme Court’s decision to hear a case testing the agency’s legal authority. Regan noted that there are opportunities to save energy “inside the fence line” that were not cost effective or available 10 years ago. (Bloomberg)

Better SAF than sorry – Major US airlines and Amazon’s aviation unit are joining an effort to speed development and use of sustainable aviation fuels (SAF) to decrease emissions in air transport. The Sustainable Aviation Buyers Alliance (SABA) said Amazon Air, Alaska Airlines, JetBlue, and United Airlines are joining the effort, which includes major corporate airline customers, to help drive greater SAF production, price cuts and technological advancements. The Environmental Defense Fund and the Rocky Mountain Institute launched the SABA in April with companies including Boeing, Bank of America, JPMorgan Chase, Microsoft, and Netflix to support increased market demand for SAFs. On Tuesday, the US said it was setting a goal of achieving net zero emissions from its aviation sector by 2050. The White House said in September it was targeting 20% lower aviation emissions by 2030. Major US airlines backed a voluntary industry target of 3 bln gal (11.35 bln L) of SAF use in 2030. (Reuters)

Murphy’s law – New Jersey Governor Phil Murphy (D) on Wednesday signed an executive order creating an interim GHG reduction target of 50% below 2006 levels by 2030, en route to an 80% reduction by 2050. He also announced the latest round of funding for RGGI auction revenues, with the state having taken in nearly $170 mln in auction proceeds since its re-entry to the Northeast and Mid-Atlantic power sector carbon market in Jan. 2020. (New Jersey Business)

ASIA PACIFIC

Morrison moolah – Australia’s Morrison government will invest A$500 mln into a new A$1 bln fund to help commercialise low emissions technology, including CCS and soil carbon, The Guardian reports. The fund will be administered by the Clean Energy Finance Corporation (CEFC) after the Coalition legislates new rules allowing it to invest in CCS, a controversial technology experts warn can’t be relied on to do the heavy lifting of Australia’s emissions reduction. The low emissions technology commercialisation fund will consist of a A$500 mln injection of new capital from the government and a further A$500 mln raised by the CEFC from private investors to support Australian early stage companies to develop new technology. The energy minister, Angus Taylor, said the fund will “address a gap in the Australian market, where currently small, complex, technology-focused startups can be considered to be too risky to finance”. However, it will also be expected to earn a positive return, meaning the investment does not hit the budget bottom line. Legislation will be required to set up the fund and alter the CEFC mandate, setting up a potential clash with the Labor Party, which opposes attempts to use the Australian Renewable Energy Agency to invest in CCS and clean hydrogen made using gas.

Ship the CO2 – Japanese shipbuilder Mitsubishi Shipbuilding, part of Mitsubishi Heavy Industries Group, and compatriot shipping company NYK Line, have agreed to jointly develop a large-scale liquefied CO2 (LCO2) carrier, Offshore Energy reports. To facilitate the development of technologies for transporting CO2 using large vessels, this project will combine Mitsubishi Shipbuilding’s gas handling technologies with NYK Line’s knowledge in operations of not only small and medium-sized vessels but also large vessels that are expected to increase in demand globally. The two companies will participate in the CCUS value chain based on the development of LCO2 carriers.

Green growth – The energy outlook for China’s economic growth is sustainable while decoupling from energy consumption along the country’s path to become carbon neutral by 2060, according to a report published Wednesday by the Energy Research Institute of the Chinese Academy of Macroeconomic Research. In the scenario where China achieves carbon neutrality by 2060, China’s energy intensity will drop by 23% compared with 2020, where renewable energy will carry the bulk of the energy demand, growing from 15% in 2020 to more than 95%.

Coal project uncertainty – China’s pledge to stop building coal power plants abroad could lead to a sharp drop in the number of coal plants being completed in Asia, according to a study released on Wednesday, Straits Times reports. President Xi Jinping’s announcement in September that China would no longer build coal plants overseas could significantly limit the financing of such projects in the developing world, especially those that have yet to secure funding, said an analysis by the Centre for Research on Energy and Clean Air and Global Energy Monitor, which tracks fossil fuel projects. Prior to Xi’s announcement, more than 65 GW of coal-fired power plants were planned for construction in Asian countries outside of China and India. If all power plants dependent on Chinese support were cancelled, it would remove two-thirds of these planned projects, leaving 22 GW remaining in just eight countries, according to the report. And of the remaining 22 GW – totalling 28 projects – less than a third have secured finance, suggesting some of these might not be built, the authors said.

EMEA

Hydrogen deals – Norsk Hydro and fossil fuel giant Shell are to look into the potential of joint projects focused on green hydrogen production, CNBC reports. In an announcement Tuesday, Norway’s Hydro said a memorandum of understanding had been signed between the two parties. Under the deal, Shell and Hydro’s green hydrogen business, Hydro Havrand, will focus on the joint generation and supply of hydrogen “produced from renewable electricity in hubs centred around Hydro and Shell’s own business, and where they see strong potential for scaling production for customers in heavy industry and transport.” From sites in Europe, the initial aim is to find opportunities for the production and supply of renewable hydrogen for their own operations alongside the wider market. “The intention is to expand into additional regions and locations over time,” Hydro said. Also on Tuesday, Portugese utility EDP announced that it was increasing its bet on green hydrogen and aimed to reach 1.5 GW of installed capacity by 2030, capitalising on its presence in key markets such as Iberia, the US, and Brazil, according to Reuters.

VOLUNTARY

Billion beaten – The value of voluntary carbon market (VC) trades in 2021 has exceeded the $1 bln mark, according to updated transaction data collected by Ecosystem Marketplace. The non-profit organisation noted the additional 59.1 MtCO2e of 2021 VCM carbon credit trades have a corresponding market value of $258.2 mln, adding to the $748 mln reported earlier this year. Ecosystem Marketplace noted the new data is a combination of carbon credit trades for the full calendar year, if they hadn’t yet reported in 2021, and newly contracted trades since Aug. 31, which was the cutoff reporting date for the first instalment of the organisation’s State of the Voluntary Carbon Markets 2021 report, when it initially said the VCM was on track to surpass $1 bln in value this year alone.

Carbon price, for life – Swedish automaker Volvo said on Wednesday it had set an internal carbon price of 1,000 Swedish crowns ($116.30) a tonne, part of attempts to ensure all future projects are sustainable. Announcing the move at COP26 as it joined an imitative to phase out fossil fuel cars and vans, the company said it had deliberately set a relatively high price to “future proof” itself. Volvo said it was the first automaker to set such a price across its whole operations, as part of its aim to be a climate neutral company by 2040. Going forward, every new car project would go through a “sustainability sense-check”, with a carbon price assigned throughout the life of the vehicle, to ensure it would be profitable even under a much higher government-set price. (Reuters)

Droppin’ more seeds – Evergrow, a “stealth climate fintech startup”, just landed over $7 million in seed funding, TechCrunch reports. With a two-pronged approach, Evergrow aims to be the world’s first dedicated carbon offtake company — rapidly funding climate developer projects and initiating long-term offtake agreements for these projects. Evergrow founders James Richards and Luke Whiting aim to streamline and standardise this process. “We have set the goal internally of supporting the avoidance, reduction or removal of one gigaton of CO2e by 2030; scaling to a billion tonnes a year shortly there after,” said Richards, a former Wall Street lawyer. One of the larger seed rounds of 2021 in the industry, the raise was led by XYZ Venture Capital and Congruent Ventures with participation from First Round Capital, Garuda Ventures, MCJ Collective, Skyview Ventures and numerous other individual investors. Separately, if people subscribe to music, why wouldn’t they subscribe to carbon offsetting to alleviate their conscience about the climate crisis? That’s partly the thinking behind British startup Ecologi, which is using $8 mln in funding raised to plant 1 million trees every 10 days in places like Africa and Latin America, as well as doing things like protecting peatlands in Indonesia. In April, Ecologi closed a seed investment round of $5.75 mln, TechCrunch reports. The subscription service – used by 35,000 individuals and businesses – allows members to “grow their own forest” with at least 12 trees a month and offset their carbon footprint by funding a wide range of the carbon-reducing projects. Launched in 2019, the company also puts all receipts, certificates, board minutes and financial statements up on their public ledger. In early 2022, the company also plans to launch Ecologi Zero, its real-time carbon footprinting software for businesses. This would compete with other carbon footprinting SaaS startups such as Normative, Spherics, Plan A, and others.

SCIENCE & TECH

Reality check – There may be more than 250 GW of green hydrogen projects in the global pipeline, and a seemingly endless stream of announcements to use vast quantities of the zero-carbon gas to decarbonise everything from trucks and heating to steel and aviation, but the simple truth is that renewable H2 barely exists today, according to Recharge, in a summary of a report from the International Renewable Energy Agency and the World Economic Forum on enabling lower cost green hydrogen. Just 200 MW of electrolysers — the machines that use electricity to split water molecules into hydrogen and oxygen — are currently deployed worldwide, and not all of those are even using renewable energy. Green hydrogen is currently far more expensive to produce than the grey H2 derived from unabated fossil fuels that accounts for 95-99% of the world’s hydrogen demand today. The IEA puts the current cost of green hydrogen at $3-8/kg, compared to $0.50-1.70/kg for unabated grey hydrogen. The consensus view is that governments will need to subsidise green hydrogen in the short to medium term to make it affordable and create a viable and sustainable market for the gas — in a similar way to how feed-in tariffs and national tenders have drastically cut the cost of wind and solar power over the past 20 years.

AND FINALLY…

On the impossible past – The hottest possible events in our current climate may have been “virtually impossible” without human-caused GHG emissions, according to a new study published in Environmental Research Letters. The authors analysed daily data from a “large ensemble” of simulations from one model in the sixth Coupled Model Intercomparison Project, both with and without human-caused emissions. They found that, in the absence of these emissions, the maximum daily, seasonal, and annual-scale thresholds of the model are never reached in large parts of the world. The study added that when including global warming, “all years in the recent period are hotter than the hottest early-period year over most of the globe”. (Carbon Brief)

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