CP Daily: Thursday February 24, 2022

Published 02:25 on February 25, 2022  /  Last updated at 02:25 on February 25, 2022  / Carbon Pulse /  Newsletters

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

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ANALYSIS: Central banks face increasing climate-related headwinds in battle to curb inflation

Central banks have clearly signalled their intent to tighten monetary policy to help tackle the sky-high prices that are plaguing both sides of the Atlantic, but lowering inflation will face hindrances from the unchartered realities of climate change and its associated ‘greenflation’.


WCI carbon auction clears at fourth consecutive all-time high during Q1

California and Quebec sold current vintage carbon allowances at a fresh all-time high and a record premium to the secondary market during the February sale, though the advance auction cleared at the floor as it failed to sell out for the first time in two years, according to results released Thursday.

NA Markets: CCAs meander before rocketing after Q1 auction result publication, RGGI ticks up

California Carbon Allowance (CCA) prices were stable this week before experiencing extreme volatility on Thursday amid geopolitical instability and the publication of record-breaking WCI auction results, while RGGI Allowance (RGA) values strengthened within their recent range.


Euro Markets: EUAs plunge, gas soars as much as 60% as Russian forces enter Ukraine

European carbon prices plunged as much as 9.4% on Thursday while front-month gas prices were up more than 60% at one point as Russian forces crossed into Ukrainian territory and attacks were reported on Ukrainian military targets across the country.

South Africa extends first carbon tax phase while increasing future price trajectory, offset usage limits

South Africa has extended the first phase of its carbon tax regime, prolonging the availability of transitional support measures while accelerating future raises in the levy and increasing offset usage limits.

Drax’s fossil generation falls 75% in 2021 following gas asset sales

ETS-covered coal and gas power generated by UK utility Drax fell by more than 75% year on year as the firm ended all commercial coal operations and completed the sale of its gas assets, the company announced in full-year results on Thursday.


Ukraine crisis to weigh on VER prices as buyers step back -traders

Voluntary emissions reduction (VER) prices are likely to come under pressure as buyers step away from the market amid huge uncertainties thrown up by Russia’s invasion of Ukraine, an online panel heard on Thursday.


China accelerates coal plant construction despite carbon neutral pledge -study

New coal plant construction projects in China rose to a five-year high last year, tripling numbers in the rest of the world combined, while new project approvals have picked up pace in the first few weeks of 2022, according to a report released Thursday.

Big Australian fossil fuel project emissions sharply higher than originally estimated, study finds

Around one-third of Australian fossil fuel projects assessed by an environmental group were found to be emitting more greenhouse gases than was estimated at the time of their approval by regulators, casting doubt on the efficacy of instruments such as the Safeguard Mechanism to curb carbon pollution, a study released on Thursday has found.


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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


North American Carbon World (NACW) 2022 – Apr. 6-8 in Anaheim, California – presented by the Climate Action Reserve: Learn, collaborate, and network on carbon markets and climate policy at NACW, North America’s largest carbon event. NACW features comprehensive and up-to-date information, key thought leaders advancing innovative climate solutions, and the best networking opportunities with colleagues in the business, government, nonprofit, and academic sectors. NACW will dive into the status and future of North American carbon markets, climate policies, innovative solutions, natural climate solutions, net zero pledges and beyond, transportation and LCFS markets. www.nacwconference.com


At a loss – The US is pushing back against the use of the term “losses and damages” in a leading scientific report on climate impacts, sources close to the negotiations have told Climate Home News. The 18-chapter report by UN scientific body IPCC, due to be published on Monday, focuses on the impacts of global heating on human and natural systems and the options and limits to adapt to them. A draft, obtained by Climate Home News, states that human-induced climate change has already “caused widespread losses and damages to nature and people, despite adaptation efforts”. But, during a virtual meeting of national delegates this week, the US pushed for the term “losses and damages” to be replaced with the word “impacts”. Under the Paris Agreement, countries agreed to help victims of climate change recover after extreme weather events or slower-onset climate disasters such as sea-level rise. But wealthy nations have fiercely resisted providing specific finance for these losses and refused to accept any liability or compensation claims for their historic responsibility in causing climate change.

Beware the backslide – Climate change may be one key casualty of the Ukraine war. After Russia’s invasion, Western politicians may push for more renewables long term, but they also need more dirty energy today, writes Reuters Breakingviews’ Neil Unmack. “Investors, lured by high crude prices, will struggle to punish polluters,” he said. “In the short term, war could shift power towards the green advocates. Europe in particular will need to reduce its dependence on Russian gas … Yet wind farms and solar parks take time to build, and battery cars need charging networks. In the meantime, energy prices must come down and security of supply needs a quicker fix.” In recent years, investors have poured money into ESG funds. Yet such vehicles have performed badly in recent months. High oil prices may make companies like Shell, whose shares rose as much as 4% on Thursday, a safe haven. “The longer the war drags on, the more investors and politicians may struggle to stay virtuous.”


Security of supply – Germany is sufficiently supplied with energy, said economy and climate minister Robert Habeck following the Russian invasion of Ukraine on Thursday. “If there is such a thing as good news on such a day, it is that the energy supply in Germany is secure,” Habeck told journalists in Berlin. He added he would do “everything” to keep it that way. Around 35% of the country’s oil imports come from Russia, but a national reserve would secure supply for 90 days even if supply was stopped, he said. While Germany had a gas dependency of 55% on Russian imports, storage levels had stabilised. “We can now say that we will get through this winter safely. The supply of gas is secure even in the event that prices continue to skyrocket or Russia reduces or completely cuts off the gas supply,” Habeck said. About half of Germany’s hard coal imports also come from Russia but Berlin outlined that it would introduce a reserve to guarantee supply if required. Russia’s attack on Ukraine demonstrated that Germany needs to become independent of fossil fuel imports “as quickly as possible” and speed up renewables expansion, he said. Until then, Germany would have to diversify its supply such as with the additional construction of LNG terminals. (Clean Energy Wire)

Permit problems – Complex and slow permitting procedures are stalling the rollout of wind power in Europe, meaning the EU may miss its climate goals, the wind industry has warned. The latest report from the industry body WindEurope, gives a grim picture of a struggling European wind industry. “Land is not the issue. Finance is not the issue. Technology is not the issue. Public opinion is not the issue. It’s the sheer complexity of the permitting procedures,” the CEO of WindEurope Giles Dickson told Euractiv. The EU installed 11 GW of wind power in 2021 and is expected to install an average of 17.6 GW between now and 2026. This falls short of the 32 GW the industry says is needed to reach the EU’s target of 40% of renewables in its energy mix by 2030. While 2021 was a record year for wind installations, progress was 11% lower than the wind industry forecast last year, the report warned. And although the level of wind power in Europe is expected to grow over the next decade, it will be nowhere near the increase needed because of supply chain issues and permitting problems. The European Parliament has also called for a swift rollout of offshore renewable energy and quicker permitting.

This is not a drill – The best way to ease consumer pain from high energy prices is to stop using fossil fuels rather than drill for more of them, according to the UK government’s climate advisers Climate Change Committee (CCC). Some MPs from the ruling Conservative party want the government to expand production of shale and North Sea gas, saying it would lower bills. But the CCC said UK-produced gas would simply be sold internationally and barely reduce the consumer price. Instead, wind and solar power, as well as home insulation, would be a better route. The CCC warned that new fossil fuel projects in the North Sea would, in some cases, not deliver gas until 2050 – the date when climate laws stipulate that the UK must be almost completely gas-free. It said it favours tighter restrictions on drilling in the North Sea, and an overall “presumption against exploration”. (BBC)

You’re grounded – Russia’s Aeroflot has been banned from flying to the UK after President Vladimir Putin ordered an invasion of Ukraine. Prime Minister Boris Johnson announced the ban in parliament and the UK Civil Aviation Authority said it had suspended Aeroflot’s foreign carrier permit. It’s unclear whether the EU will follow suit. Some of Aeroflot’s and other Russian airline routes are covered under the region’s carbon markets, meaning grounded flights translates into fewer ETS emissions. (Reuters)


Singapore hub – EDP Renewables (EDPR), the world’s fourth-largest renewable energy producer, said that it plans to invest up to S$10 bln ($7.4 bln) by 2030 to establish a clean energy hub in Singapore for the Asia Pacific region, Channel News Asia reports. EDPR, which is 75% owned by Portugal’s biggest utility, Energias de Portugal, closed a S$1 bln deal to acquire a 91% stake in Southeast Asian renewables firm Sunseap Group on Thursday after all pending regulatory conditions were met for the agreement reached in November. Apart from solar and wind projects, EDPR and Sunseap intends to explore opportunities for co-operation in energy storage and green hydrogen.

More hydrogen – Australian export terminal operator, Dalrymple Bay Infrastructure, announced that it had signed a funding agreement with major shareholders and potential project partners to conduct a feasibility study that will assess the viability and scale of a potential hydrogen production facility at Hay Point in Queensland, Renew Economy reports. The company operates the Dalrymple Bay Terminal, one of the world’s largest export terminals for metallurgical coal, and which is served by coal producers in the Bowen Basin. It says it is now looking to hydrogen exports as an opportunity to diversify its business. Interestingly, it is 49% owned by Brookfield Infrastructure Group, part of the funds management giant that has teamed up with Mike Cannon-Brookes for a bid for AGL with a view to fast tracking the closure of its coal generators.


Flare scare – Gas flaring is soaring in Mexico, derailing the country’s climate pledges as it seeks to boost oil output, Reuters reports. It said the volume of the potent warming gas flared leapt by 50% to 5.8 bcm in 2020, up from 3.9 bcm in 2018 when President Andres Manuel Lopez Obrador took office, putting Mexico among the world’s top 10 flarers. And preliminary data collected for the first 10 months of 2021 suggest Mexico is on track to break 2020’s record of flaring activity, according to the Colorado School of Mines.

Junk mail – The US Postal Service will buy nearly 150,000 gas-powered mail delivery trucks, defying objections from President Joe Biden’s administration and advocates. The new postal delivery fleet, which includes more vehicles than any other government agency and accounts for nearly one-third of all federally owned cars and trucks, will achieve only a 0.4-mpg fuel efficiency improvement over the current fleet. Postmaster General DeJoy, a Trump appointee, estimated buying electric delivery trucks would cost $30,000 more per vehicle, but that number confused regulators and advocates who say the figure doesn’t match independent cost estimates. (Climate Nexus)


Yusof says no – The Malaysian state of Sabah’s top lawyer Asiah Mohd Yusof has declared dead a $76.5 bln REDD forest protection project deal in Borneo, Al Jazeera reports following its investigation into the project. The controversial carbon trading deal in Malaysian Borneo now looks increasingly in danger after now being declared illegal by a senior legal authority, unfeasible by scientists, and unsellable by carbon trading experts, according to the article. Carbon Pulse previously reported that the project may be in jeopardy following the publication of the Al Jazeera investigation. The deal includes a little known Singapore-based shell company named Hoch Standard being set to receive 30% of the revenue for marketing the resulting offsets.


Chevron capture – Chevron has invested in industrial carbon capture and storage firm Carbon Clean, the companies announced Thursday. “The size and cost of installing carbon capture technology has been a barrier to adoption. Carbon Clean’s technology is designed to reduce the costs and physical footprint required for carbon capture compared with many existing approaches. Carbon Clean’s technology and fully modular construction also aims to reduce site disruption and facilitate faster permitting,” they said in a release. No further details regarding the transaction were announced. As part of the investment, Chevron and Carbon Clean are seeking to develop a carbon capture pilot for Carbon Clean’s CycloneCC technology on a gas turbine in San Joaquin Valley, California. Chevron is targeting 25 Mt of CO₂ per year in equity storage by the end of this decade, with a focus on developing regional hubs that leverage its existing and emerging partnerships with customers, governments, and industry. Chevron Technology Ventures made an initial investment in Carbon Clean in 2020. In 2021, Chevron launched Chevron New Energies (CNE) to accelerate lower carbon business opportunities in CCUS, hydrogen, and offsets and emerging energies, as well as support Chevron’s ongoing growth in biofuels.


Sharm’s not so charming – Egypt, host of the COP27 UN climate talks in Nov. 7-18, has set minimum prices hotels should charge for rooms in Sharm el-Sheikh during the conference – hiking up costs, Climate Home reports, citing a letter from the country’s hotel association. It sets a price of at least $500 per night for a room in a five-star hotel – nearly five times the usual cost. Rooms in four-star hotels won’t go for less than $350 per night and $120 per night is the floor rate in two-star institutions. Campaigners warned that participation of activists and low-income country delegates risks being restricted again due  to the hiked-up prices and the absence of engagement with green groups.

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