CP Daily: Monday December 13, 2021

Published 01:33 on December 14, 2021  /  Last updated at 01:33 on December 14, 2021  /  Newsletters  /  No Comments

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

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TOP STORY

Crypto carbon demand brings back shunned HFC-23 credits

More than half a million highly controversial industrial carbon credits have been brought on-chain over the past week, as demand created via crypto venture Klima DAO has offered an unexpected path to profit for holders of the units shunned for almost a decade after project owners were found to be cheating.

EMEA

Polish calls for ETS intervention likely to be sidelined by EU chiefs despite Czech backing

Poland’s calls for EU ETS intervention are unlikely to gain traction at this week’s EU leaders’ summit, even as a Czechia minister said Prague may support the move, according to EU and observer sources on Monday.

NGOs see free allocations, exports as key sticking points in EU’s CBAM talks

Free EUA allocation and provision for EU exporters are expected to be key sticking points as EU lawmakers grapple with the bloc’s proposed Carbon Border Adjustment Mechanism (CBAM), experts said on Monday.

Euro Markets: EUAs give up early gains as options traders resume liquidations

EUAs gave away sharp early gains on Monday as options traders resumed liquidating short call positions, even as gas and power prices surged after politicians cast further doubt on an early start-up of the Nord Stream 2 gas pipeline.

Europe’s meat and dairy emissions growing, greenwashing efforts underway -report

Europe’s 35 biggest meat and dairy companies were responsible for 7% of the bloc’s emissions in 2018, but only three of these companies have committed to reduce their overall emissions from livestock, and many are using “dubious” offsets for greenwashing purposes, according to research published Monday.

AMERICAS

Canada proposes annual tightening rate for large emitter programme benchmarks

Canada intends on increasing the stringency of industry production benchmarks under the ‘backstop’ output-based pricing system (OBPS) after next year, while it may also initiate linkage discussions with provinces and territories with subnational programmes, the federal environment ministry said Friday.

WCI emitters register record CCA short position, financials add to holdings

Compliance entities saw their California Carbon Allowance (CCA) short position soar to an all-time high last week, while funds and other speculators modestly padded their long position, according to US Commodity Futures Trading Commission (CFTC) data published Friday.

ASIA PACIFIC

Chinese emissions likely to surge in 2022 as stimulus expected ahead of major party meeting -analyst

China’s greenhouse gas emissions are likely to increase next year as the government is emphasising economic stability ahead of the important party congress in late 2022, according to analysis published Monday.

Asia’s CCS prospects face cost and technical barriers for investors, governments, report warns

The deployment of CCS in key Asian economies will fall short of expectations due to financial and operational hurdles remaining for several decades for this widely touted low carbon technology, a report released on Monday claimed.

VOLUNTARY

VCM Report: VERs post weekly loss amid profit-taking, seller stand-off

Voluntary emissions reduction (VER) prices slipped in most standardised categories this week amid some year-end profit-taking and as sellers were seen as unwilling to accept a drop in value in the voluntary carbon market.

Bluesource, Star Royalties announce funding deal for ag sector VER programme

North American carbon credit developer Bluesource and precious metals and green royalty and streaming investment company Star Royalties on Monday revealed an agreement to generate hundreds of thousands of voluntary emissions reductions (VERs) annually from a regenerative agriculture programme.

Marubeni delivers world’s first “carbon neutral” ethylene cargo in deal with Taiwan’s CPC

Japanese global trading house Marubeni and Taiwan’s national oil company, CPC, will complete the world’s first “carbon neutral” ethylene cargo delivery, the two companies have announced.

INTERNATIONAL

World Bank to shed light on gap to net zero-aligned carbon prices

The World Bank is exploring an approach that would provide more clarity on the current state of global carbon prices compared to levels needed to drive emissions to net zero, highlighting the significant gap and providing a benchmark for climate ambition, a virtual session heard Monday.

COMMENT

MARC(U) MY WORD: EU’s ‘Fit for 55’ should bring clarity for 29a

The potential to trigger Article 29a of the EU ETS, which provides for a cost containment mechanism, has now become real, with some analysts claiming that the conditions have already been fulfilled or are very close to being fulfilled. As such, it’s becoming imperative for the good functioning of the ETS, given the current trend in prices but also as a matter of principle, that current vagueness in 29a’s wording should be spelled out as part of the bloc’s “Fit for 55” package.

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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

Malpass impasse – The World Bank, led by the US economist David Malpass, pushed for the joint statement by development banks at the UN COP26 climate summit to be shortened and weakened, the FT reports citing anonymous sources. The statement did not include any specific targets or deadlines. “Malpass is the main block … He doesn’t think this is a priority,” said one person familiar with the talks.

ASIA PACIFIC

Coal phase-out – South Korea will close down 24 ageing coal-fired power plants permanently by 2034 as part of efforts to phase out coal consumption for electricity generation by 2050 and boost the country’s clean hydrogen self-sufficiency ratio to 34% in 2030, and further to 60% in 2050, S&P Global Platts reports. The government unveiled the country’s first detailed “action plans” to achieve a carbon neutrality under which South Korea also plans to use carbon-free sources of ammonia and hydrogen as a key power generation fuel to reduce coal and LNG demand for electricity production. “A total of 24 ageing coal-fired power plants will be fully retired by 2034 and operation of the other coal power plants will be restricted, which will lead to no coal-based electricity generation by 2050,” the joint statement said.

Lining it up – South Korean conglomerate SK Group has signed an MoU with the Vietnamese government to invest in and develop efforts in the South East Asian nation to cut carbon emissions, it announced on Monday. The approach is part of the group’s ambition to contribute to the global reduction of 200 MtCO2e. Its announcement didn’t specifically mention carbon credits, though SK Group said it was looking to create “good business opportunities”. The Korean government has previously said Vietnam is one of four counterparties it is negotiating with in order to generate credits under the Paris Agreement’s Article 6.2.

Hydrogen fast track – Australia’s Northern Territory government will fast track the planning process for the massive 10GW Desert Bloom green hydrogen project, that will seek to produce renewable hydrogen using water drawn from the air, Renew Economy reports. The A$15 bln project is being developed by Aqua Aerem in the middle of the Australian outback, and would use huge arrays of solar power to both source its own water and produce hydrogen through electrolysis. The project is aiming to produce the renewable hydrogen at a cost below $2/kg by 2027 – a benchmark where hydrogen becomes cost competitive with fossil fuels – with a planned peak production capacity of 410,000 tonnes of hydrogen for domestic and international markets. The Northern Territory government said that it had given the project ‘major project’ status to help fast track its approvals process and that it would work with Aqua Aerem to identify a suitable location and planning for various the stages of development. Aqua Aerem plans to produce its first hydrogen from an initial stage of the in 2023, gradually ramping up to full production by 2027.

New hydrogen business – Sinopec has set up a new subsidiary in Xiong’an, near Beijing, to specialise in the hydrogen fuel business, China’s second-largest oil and gas company said, Channel News Asia reports. Sinopec Xiong’an New Energy, a unit fully owned by Sinopec, has registered capital of 100 mln yuan , the company said. The new entity will engage primarily in building hydrogen infrastructure, managing hydrogen refuelling stations, as well as storage and pipeline transportation of the low-carbon fuel. The state giant has pledged to spend some $4.6 bln on hydrogen energy by 2025 as it pivots to producing natural gas and hydrogen as part of becoming a carbon neutral energy provider by 2050. Sinopec, which owns one of the world’s largest fuel retailing networks, aims to build 1,000 hydrogen refuelling stations by 2025.

AMERICAS

Sore on EOR – California lawmaker Ro Khanna introduced a bill into the US House of Representatives on Monday that would prevent investors from securing CCS tax credits if the carbon is used to boost oil production. The bill has little chance of being adopted into law, but reflects deep political divisions in Congress over whether and how CCS can be used as a tool in the fight against climate change. The tax credit, known as 45Q, allows companies to earn money for every tonne of CO2 that they capture off a polluting facility and store underground. That includes carbon injected into oil fields to push trapped oil out of the ground, something the industry calls enhanced oil recovery (EOR). Khanna’s bill would revise 45Q by eliminating any credit for captured carbon used for EOR, which environmentalists say defeats the purpose of carbon capture by promoting the carbon-intensive fossil fuels industry. (Reuters)

Bring your own BBB – Meanwhile, the Senate is poised to begin bipartisan meetings with the parliamentarian this week, where both parties will haggle over what provisions belong in Democrats’ budget reconciliation bill and what provisions violate the Byrd rule that restricts measures that do not directly affect spending or revenues. Ahead of the clash, the US Senate Finance Committee unveiled updated text Saturday for its portion of the bill. The panel has jurisdiction over the package of clean energy tax credits that comprise the largest portion of the bill’s climate provisions. The committee “made targeted improvements to the Build Back Better Act, and is ready to move forward in this process,” Chair Ron Wyden said in a statement, but they still don’t resolve some of the highest-profile, lingering disagreements on the climate front. While the changes unveiled Saturday were largely technical, they did offer a significant victory for the hydropower industry, which had so far largely been left out of the package. The text eliminates a half-credit reduction under current law for hydropower projects under the production tax credit and expands the investment tax credit to include environmental improvements to hydroelectric dams. Other tweaks include an expansion of the PTC to include brownfields as a qualifying energy community and the exclusion of forested lands. (Politico)

Publication push – Pennsylvania Secretary of Environmental Protection Patrick McDonnell on Friday wrote to the Legislative Reference Bureau (LRB) to insist that it publish Democratic Governor Tom Wolf’s RGGI-aligned cap-and-trade regulation. The LRB on Nov. 30 denied the DEP’s request to publish the regulation in the Pennsylvania Bulletin because a Senate resolution disapproving of the RGGI rulemaking is still pending before the Pennsylvania House of Representatives. Republicans who control the General Assembly oppose the regulation and argue that they have more time, months even, to take votes on it. McDonnell wrote that the legislative review period has expired and that Republicans’ interpretation of the law is wrong. House and Senate leaders, however, did not back down Monday from their interpretation of the law and its timeline. Read Carbon Pulse’s recent article on the probable delays to Pennsylvania’s RGGI participation next year as a result of the ongoing standoff. (AP)

Thinkin’ in Lincoln – The board of directors of the Nebraska Public Power District, the largest electric utility in the state, last week voted in favour of adopting a nonbinding decarbonisation goal of net zero emissions by 2050, which means that Nebraska is now the only Republican-controlled state in the US to plan to fully decarbonise its electricity sector by mid-century. Plenty of private utilities have pledged to go green in recent years, even in Republican-controlled states. But Nebraska is unique because it’s the only state in the country where electric utilities are publicly owned. Nebraska’s two other major utilities, Omaha Public Power District and Lincoln Electric System, have committed over the past few years to reach net zero emissions by 2050 and 2040, respectively. (Grist)

EMEA

Better together – The European Commission will propose a system for EU countries to voluntarily jointly buy gas to form strategic reserves of the fuel, a measure drawn up in response to soaring energy prices, according to a document shared with countries ahead of a summit this week. Soaring energy prices have left governments scrambling to use subsidies and tax breaks to shield consumers from high bills, and prompted calls from some countries for an EU system of joint gas buying. A proposal to update EU gas market rules, which the Commission is due to publish on Wednesday, would set up such a system. “The proposals will include an enabling framework for the joint procurement of gas strategic stocks by regulated entities on a voluntary basis,” the Commission said in a document circulated to countries ahead of an EU leaders summit on Thursday, and seen by Reuters. The system will “contribute to EU coordinated measures in case of Union wide emergency”, it said. Separately, the EU is planning a hard deadline to end long-term contracts to import natural gas as part of its green shift, a setback for top supplier Russia. The Commission wants to prevent such contracts from being extended beyond 2049 in a sweeping overhaul of its energy markets, according to documents seen by Bloomberg. Brussels will also propose measures to strengthen security of supply as the bloc faces record prices and acute shortages this winter.

Berlin boost – Germany’s new government has passed a supplementary budget to supercharge its climate and transformation fund with a debt-financed injection of €60 bln. Agreed as part of its coalition deal, the manoeuvre allows the parties to make the most of a temporary, pandemic-related suspension of borrowing limits in the constitution. In addition, the government will channel some €18 bln of tax revenue, mainly stemming from environmental taxes and the ETS auction revenues, into its climate and transformation fund next year. (Reuters)

Subsidy slice – The UK’s latest round of its Contracts for Difference (CfD) scheme to secure 12 GW of electricity capacity – its biggest so far – launched on Monday and is open to a number of renewable energy technologies. Offshore and onshore wind, solar, tidal, and floating offshore wind projects to build the next generation of Britain’s green energy products are all eligible to bid for a chunk of the funding. (Press Association)

Timber time – The Gresham House Forest Growth & Sustainability Fund saw £127 mln in subscriptions during its first fundraising, including commitments from two major institutional investors, exceeding the initial target of £100 mln. The UK’s largest commercial forestry manager said it expects to conduct a second fundraising later this year. The fund’s manager Gresham House aims to generate returns by selling UK timber and through the capital growth of land and trees, while also producing carbon credits from the creation of new woodland that allow investors to ‘inset’ their emissions or to provide income. (Private Equity Wire)

Dam dealingSwitzerland is considering building new hydroelectric dams amid a squeeze on European energy supplies that’s caused a surge in prices. The Federal Office of Energy met Monday to consider a new list of projects, newspaper Le Matin Dimanche reported, citing people familiar with the plans. Among the potential new dams is Alpiq’s Gornerli project which would face the famed Matterhorn mountain peak. (Bloomberg)

AND FINALLY…

Shady selling – President Joe Biden’s administration admitted that a court decision did not compel it to lease vast tracts of the Gulf of Mexico for oil and gas drilling, shortly before claiming it was legally obliged to do so when announcing the sell-off, The Guardian reports. Last month, the US government held the largest-ever auction of oil and gas drilling leases in the Gulf of Mexico’s history, offering up more than 32 mln ha of the gulf’s seabed for fossil fuel extraction. The enormous sale, which took place just four days after COP26 in Scotland, represented a spectacular about-turn from Biden’s previous promise to halt offshore drilling and was denounced by outraged environmental groups as a “huge carbon bomb”. The president’s administration insisted it was obliged to hold the lease sale due to a court ruling in favour of a dozen states that sued to lift a blanket pause placed on new drilling permits by Biden. But a memo filed by the US Department of Justice before the lease sale acknowledges that this judgement does not force the government to auction off drilling rights to the gulf.

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