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TOP STORY

ANALYSIS: Virginia RGGI withdrawal needs climate law overturn, though possible exit could be orderly

Virginia Governor Glenn Youngkin (R) will most likely have to follow a measured legislative process in order to withdraw from the RGGI cap-and-trade programme, though an eventual exit from the carbon market could be more orderly than originally feared, market observers and legal experts told Carbon Pulse.

EMEA

ANALYSIS: EU lawmaker’s ETS plans seek to relieve industry, but risk windfalls

The European Parliament’s key lawmaker on ETS reforms aims to ramp up climate ambition for shipping and aviation while bolstering carbon leakage protection for what he sees as significantly more exposed heavy industries.

Key EU lawmaker pushes for earlier phaseout of free aviation ETS allowances

Brussels should bring forward the phaseout of free EU Aviation Allowances (EUAAs) by one year, thus enabling full auctioning by no later than 2026, according to the European parliamentarian in charge of steering reforms to the bloc’s emissions trading system for airlines.

Analysts double 2023 EUA forecast to €150 on scarcity outlook

Analysts at an investment bank have doubled their carbon price outlook for 2023 and by almost 50% for the 2022-30 period as a whole, judging that EU ETS allowances are becoming “increasingly scarce”.

Euro Markets: EUAs stabilise despite weaker energy as carbon outperforms

EUAs stabilised after early declines on Wednesday in line with weaker energy markets, those carbon continues to outperform key energy markets as gas prices fell back on news of increased LNG supply.

All but one country hits EU’s 2020 renewable energy targets

All but one of the 30 European countries with renewable energy targets for 2020 reached their goals, the European Commission said Wednesday, with some forced to tap intergovernmental trade provisions.

ASIA PACIFIC

Japan opens up its bilateral offsetting programme to international market

Japan has adopted new rules for its Joint Crediting Mechanism (JCM) that may see its carbon credits over time become available to the CORSIA aviation offsetting scheme or the international voluntary carbon market.

Guangdong carbon price rises to highest in over 7 years as market sees life after national ETS

The CO2 price in Guangdong’s regional carbon market has risen to its highest level since June 2014, as the government has tightened allocation settings and plans to bring in new sectors to breathe new life into the system after power producers transited to the national ETS.

Chinese futures exchange strikes up carbon market partnership with Deutsche Boerse

The Guangzhou Futures Exchange has entered into a partnership with Deutsche Boerse and its subsidiary EEX as it continues to position itself to take a share of China’s emissions trading market.

Australia approves new carbon offset methodologies

Australia has adopted three new offset methodologies, including a first approach to generate carbon credits from coastal wetland ecosystems, in a bid to increase supply to a squeezed market.

AMERICAS

Canada’s central bank climate scenarios outline policy costs, risks

The Bank of Canada has modelled a rising global carbon price aligned to the Paris Agreement temperature goals, outlining how the Canadian economy would need to be restructured to avoid the worst shocks that this would pose on the financial system.

Saskatchewan brings five additional sectors into provincial large emitter system

The Saskatchewan government on Wednesday announced the province will add five new sectors to its output-based pricing system (OBPS), though it still must petition the federal government to remove some of its largest-emitting sectors from coverage under Canada’s ‘backstop’ CO2 pricing system.

RFS Market: RINs tread below $1 as refiners seen holding back

US biofuel credit (RIN) values fell to a one-month low on Wednesday, as some participants attributed the slide to obligated entities potentially taking a breather in the Renewable Fuel Standard (RFS) market.

VOLUNTARY

London- and Dutch-based carbon consultancies merge, as offset industry consolidation trend continues

A London-based sustainability consultancy has agreed a merger with a Dutch-headquartered offset project developer and net zero authority.

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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

Berlin’s club hub – Germany will use its presidency of the G7 this year to turn the group into “a nucleus of an international climate club,” German chancellor Olaf Scholz told the Davos Agenda summit. He said club members would agree on minimum standards and – with technology transfer and climate finance provisions – hope to bring developing and emerging economies on board to coordinate investments in areas such as green hydrogen. (Clean Energy Wire)

Hydrogen high – According to a new report from Rethink Energy, H2 View reports, the impending hydrogen revolution will send shockwaves throughout the energy market and prompt one of the largest shakedowns in its history. The report suggests that hydrogen will provide a key opportunity to decarbonise 25% of all energy consumption, which is a significant figure when noticing the urgent action required in reducing fossil fuel consumption in the energy market in line with climate action. By mid-century, hydrogen costs will also have fallen by 95% over the levels seen in 2020, which will additionally see demand increase 10-fold for the clean energy carrier. With this increase, it is expected that 771 Mt of hydrogen will be required per year in 2050 to reach demand as the world races towards net zero emissions.

Scored an own coal – A coalition of climate-conscious insurance companies have reportedly scrapped plans to stop insuring coal miners, to ensure they are not violating antitrust laws. The Net Zero Insurance Alliance, whose founding members include Axa, Allianz, and Aviva, dropped plans for a coal exit after receiving advice from lawyers that the plans to join forces to prevent coal companies from taking out insurance policies might breach anti-competition rules. Formed in July last year, the Net Zero Insurance Alliance’s 15 members have all vowed to cut their GHGs to net zero by 2050. (City AM)

EMEA

NS2 at risk – Germany signalled on Tuesday that it could halt the Nord Stream 2 pipeline from Russia if Moscow invades Ukraine, and Western nations rallied behind Kyiv over a Russian troop buildup that has stoked fears of war, Reuters reports. Stepping up diplomacy after talks with Russia ended in stalemate last week, US Secretary of State Antony Blinken will visit Kyiv on Wednesday before heading to Berlin to discuss “joint efforts to deter further Russian aggression against Ukraine” with German, British, and French officials.

Vien-nah to nuclear – Austria plans to fight the EU’s move to label energy from nuclear power and natural gas as “green” investments with a legal complaint, Euractiv reports. The European Commission is consulting with member states and European lawmakers until Jan. 21 on its plans and the final text could come into force from 2023, assuming a majority of member states or the EU Parliament fails to oppose it. Austria is mulling a complaint at the EU Court of Justice (ECJ) in the event it does pass, the minister for the environment has said, stating that “neither of these two forms of energy is sustainable and therefore has no place in the taxonomy regulation”. The taxonomy is a classification system intended to direct billions to clean energy projects to meet the EU goal of net zero emissions by 2050.

Dock it from our pay – The Polish government has rejected the European Commission’s order to pay outstanding fines for not complying with the EU Court of Justice’s ruling to stop the activity of the lignite mine in Turow, which was the subject of the clash between Poland and Czechia. However, the government has agreed to receive reduced payments from the EU budget, Euractiv reports. Poland owes the EU more than €50 mln in cumulative daily fines, after the ECJ levied a €500,000/day penalty for failing to comply with interim measures and refusing to close the mine. The Commission said last week that two summons to pay fines imposed on Turow had been sent to Poland and that it had not yet received any money. Should the government fail to pay the fines, the Commission said it would recover the money from the penalties and that this would be done by deducting the sum mentioned in the first request from the payments Poland receives from the EU funds. Warsaw has been clear that it will not pay the fines. “If the Commission wants to dock [€50 mln] from the EU money allocated to Poland, which is in our view illegal under the EU law, it can obviously do so, but for us, the most important is the energy security of Polish people,” said government’s spokesman Piotr Mueller. Last year, Czechia sued Poland before the ECJ in Luxembourg over Turow, which is located near the Czech border and which Prague says has an adverse effect on groundwater in the region.

Steady as you CBAM – An EU CBAM must be designed to initiate the transition away from free allocation of CO2 allowances under the ETS before 2030, the Agora study outlines. A gradual and cautious introduction of the CBAM and phase down of free allocations prior to 2030 can accelerate the decarbonisation of industry, the paper found. It must be accompanied by strong, pan-European support for industry to introduce key climate-neutral technologies in CBAM sectors. An EU CBAM and the recycling of revenues from allowances sales to CBAM sectors must therefore be seen as a ‘package’ to accelerate industrial transformation in Europe to climate neutrality in key sectors like steel, aluminium, cement, and fertiliser production. The new French Presidency of the EU Council has made the implementation of a CBAM its main priority for European energy and climate policy and the so-called ‘Fit for 55’. However, the CBAM remains controversial with some industrial stakeholders who would like to retain their free allocations of CO2 emissions allowances, while other member states such as Germany have advocated for a ‘climate club’, where leading countries would act in tandem with the EU to address industrial decarbonisation and limit adverse competitiveness impacts. In the medium term, Agora suggests exporters could be protected by an exemption from the general phasedown of free allocation to CBAM sectors for the exported shares of production. In the short term, policymakers can manage risks for exporters by adopting a slightly slower rate of phasedown of free allocation prior to 2030 than under the Commission’s proposal and by freezing the technology benchmarks for free allocation.

Green envy – Germany will prioritise green hydrogen in its drive to become climate neutral, but may use blue hydrogen for a transitional period, energy and climate state secretary Patrick Graichen said during a panel discussion on energy cooperation with Norway. Blue hydrogen is made with natural gas and CCS and in this case Germany would import the gas from Norway, the minister said. He stressed that only green hydrogen is compatible with the long-term climate targets, because blue hydrogen causes residual emissions but added that the government won’t stand in the way if private investors decide to import blue hydrogen from Norway using infrastructure that can be climate-neutral in the long run. “Blue hydrogen for a transitional period in pipelines planned for green hydrogen is fine,” Graichen said. (Clean Energy Wire)

Not any port in a storm – The European Sea Ports Organisation is calling for an ambitious geographical scope for the maritime EU ETS, which would avoid creating carbon and business leakage related to ports in countries neighbouring the EU. The European Commission’s proposal for an EU maritime ETS covers the emissions from intra-EU voyages and emissions at berth, alongside half of the emissions from extra-EU voyages – both incoming and outgoing. But due to the limited scope of the proposal, ships can find ways to avoid falling in the scope of the EU ETS as much as possible in order to minimise costs. Such practices must be prevented, ESPO urged, in order to protect the integrity of EU climate policy and to avoid undermining the competitiveness and connectivity of EU markets and ports. Accordingly, the organisation is calling for the maritime EU ETS proposal to proactively prevent evasive action by forcefully applying the polluter pays-principle. A possible solution – if legally possible – could be to expand the scope of the proposal by considering the evasive call to/from a non-EU neighbouring port as a call to an EU port. Evasive port calls at neighbouring non-EU ports could seriously jeopardise the effectiveness of the maritime ETS, as it would not reduce total shipping emissions. It could even increase overall emissions, in particular when evasion leads to longer voyages.

ASIA PACIFIC

Banking on carbon – Market Forces, an Australian climate group that tracks the financial sector, claims three Australian banks, NAB, ANZ, and Westpac, are among several with net zero commitments that continue to lend to Global Infrastructure Partners (GIP), an investment fund, despite its not-so environmentally friendly investments, Financial Standard reports. Market Forces says in total 18 banks, including the three Australian banks, are lending $3.49 bln to GIP. The money will go towards GIP’s purchase of a 49% stake in the Pluto LNG Train 2 gas processing facility, paving the way for a “carbon bomb” at the scale of 15 coal power stations.

Gas-fired bedfellows – South Korean utility KEPCO has announced a set of MoUs with Saudi Arabia’s Saudi Aramco, Saudi Electric Power Co., and Aqua Power on cooperation to produce blue hydrogen and ammonia, as well as fuel conversion to gas of oil-fired power plants in Middle Eastern nation. The parties expect to improve the sustainability of existing facilities as well as building new ones under the partnership as part of their strategies to cut carbon emissions.

CO2 transport – Japan’s NYK and Norway’s Knutsen Group have formed a joint venture company for the commercial development of a liquefied CO2 marine transportation and storage business using the Knutsen developed technology PCO2 which allows transport of liquefied CO2 at ambient temperatures, Offshore Engineer reports. NYK and the Knutsen Group, will each hold a 50% stake in the new company, which has been named Knutsen NYK Carbon Carriers (KNCC). KNCC will also build and operate low/mid pressure vessels based on other technologies.

AMERICAS

Power play, part I – Public and private power companies yesterday called for the Supreme Court to uphold the US EPA’s authority to broadly regulate how they produce electricity for the nation. Consolidated Edison, Exelon, National Grid USA, and other firms expressed their support for EPA to require the sector to cut emissions using a range of approaches that look beyond technical controls at individual facilities. The companies – which provide power to about 40 mln Americans – had opposed Supreme Court review of the challenge launched by coal companies and Republican-led states that asked the justices to limit EPA’s options to regulate emissions under the Clean Air Act. In a stunning move, the right-wing court last year agreed to take up the case, which focuses on a federal rule that does not currently exist. The landmark case, set for arguments on Feb. 28, could impede President Joe Biden administration’s efforts to decarbonise the power sector and handcuff federal agencies’ authority to issue broad regulations. (E&E News)

Power play, part II – Alongside the electricity companies’ filings, environmental, public health, and clean energy industry groups urged the Court to affirm the EPA’s authority and duty to limit CO2 emissions from power plants. In the respondents’ merits brief, these groups argued that no petitioner has standing to pursue this case because there is no rule in effect for CO2 pollution from existing power plants, and the EPA has made clear any new rule will start from a clean slate. Additionally, the groups said the Republican states, coal companies, and their supports are encouraging the Supreme Court to adopt a radical approach by invoking a new “major questions” doctrine that would tear down the federal government’s ability to undertake such basic functions as ensuring the safety of food and drugs, protecting workers’ rights, or policing financial fraud.

VOLUNTARY

About the absolute – Citigroup on Wednesday set new targets to reduce the carbon emissions it helps to finance to net zero by 2050, and said it would only drop clients if all else failed in the bank’s push to curb its impact on climate change. One goal is to reduce the carbon emissions it finances in the energy sector by 29% over the next eight years, according to a report the New York-based lender released Wednesday. Citigroup will also seek to cut the emissions intensity of the portfolio of loans it makes to the power sector by 63%. Green groups pointed out that Citigroup differed from other major US banks in setting in absolute reduction target for the energy sector, but noted the plan does not rule out support for companies expanding oil and gas development. (Bloomberg)

Gulf goals – The UAE’s Abu Dhabi Global Market (ADGM) has said it achieved carbon neutrality status by offsetting its 2021 emissions, claiming to be the first international financial centre to do so. Via the AirCarbon Exchange, ADGM purchased and retired all its 2021 carbon credits via InfiniteEarth’s VCS-registered Rimba Raya project in Indonesia. (Gulf News)

AND FINALLY…

Be careful what you wish for – As Boris Johnson’s future as UK prime minister hangs in the balance, it’s worth considering what his potential exit means for one of the world’s most ambitious climate agendas, Bloomberg writes. It could signal a weakening of the British government’s focus on cutting planet-warming emissions. Few, if any, of his potential successors have shown they want to speed up the transition to a greener economy. Chancellor of the Exchequer Rishi Sunak — bookmakers’ favorite to succeed — last year tried to block spending on Johnson’s green measures. In his last major fiscal event in October, Sunak allocated too little investment to put the UK on track to reach its goal of net zero emissions by 2050 and the independent Climate Change Committee has criticised his Treasury for failing to come up with an adequate plan to fund decarbonisation. Things look bleaker still for climate policies if Liz Truss, the next most likely successor, is chosen to replace Johnson instead. The foreign secretary has aligned herself with net zero skeptics and the US Republican Party. In an interview last month with the Times of London, she labelled climate hawks such as Zac Goldsmith part of “the axis of evil”. Some other contenders, such as Michael Gove – minister in charge of housing, and Jeremy Hunt – a moderate who was the runner-up in the last leadership contest, have shown more of a commitment to tackling climate change. But the odds aren’t stacked in their favour to win the Conservative Party vote. A lot depends on which wing of the party gets any new leader’s ear. A small group of libertarian Members of Parliament led by Steve Baker want to delay progress on reaching net zero. But there’s also a caucus of more than 100 MPs calling for the transition to go faster. The government is also under pressure to find a way to protect consumers as prices rise and temperatures drop this winter, with one option being to cut green levies on energy bills that help pay for the transition.

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