CP Daily: Friday February 25, 2022

Published 00:31 on February 26, 2022  /  Last updated at 00:31 on February 26, 2022  /  Newsletters  /  No Comments

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

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TOP STORY

ANALYSIS: Analysts cool on EUA rebound prospects as Ukraine attack shocks run deep

EUAs are unlikely to quickly recover a near-10% drop in the wake of Russia’s invasion of Ukraine as the impact of the conflict is too far-reaching, several analysts told Carbon Pulse, though others expect prices to bounce back somewhat as bargain-hunters step in and coal power remains well-supported.

EMEA

European energy traders “accept the spirit” of proposed changes to EU carbon price control mechanism

European energy traders “accept the spirit” of a proposal to loosen the parameters governing a mechanism to respond to price spikes in the EU carbon market.

Euro Markets: Carbon rallies to end week 1.5% lower as energy markets give up Thursday gains

EUAs posted moderate gains on Friday to trim their weekly loss, as traders regained confidence that Russian gas flows would not be interrupted amid modest sanctions, even as Russian forces advanced on the Ukrainian capital.

Utility RWE reports 16.5% rise in ETS-covered emissions for 2021

Germany-based utility RWE, the EU’s top corporate emitter, reported a 16.5% rise in its ETS-covered thermal power output for 2021, it said on Friday, upping its demand for carbon allowances.

AMERICAS

Pennsylvania RGGI linkage slips to Q3 as court denies expedited lawsuit to publish regulation

The Pennsylvania Commonwealth Court on Friday denied the Department of Environmental Protection’s (DEP) request for an expedited schedule in a lawsuit to publish the state’s RGGI-aligned regulation, which green groups said will delay its entrance to the Northeast US cap-and-trade market until at least July.

Speculators’ CCA net length hits 9-mth low amid Q1 auction, as emitters build holdings

Financial participants parted with more California Carbon Allowances this week prior to the publication of results from the Q1 WCI auction, while compliance entities’ net short shrank to the smallest amount since May, according to US Commodity Futures Trading Commission (CFTC) data published Friday.

California regulator ARB’s carbon market chief departing for global forest group

The long-time head of California’s WCI-linked cap-and-trade programme will leave the government next week for a position with an international task force aiming to protect forests via jurisdictional REDD+ strategies.

ASIA PACIFIC

CN Markets: Chinese market sees moderate rebound in price, but traders still await clarity

Price levels and trading volumes in China’s carbon market both rebounded somewhat over the past week, but regulatory uncertainty continues to put a dampener on activity.

China’s green power scheme moves forward as govt dithers on offsets

China Southern Power Grid on Friday released more detailed trading rules for the recently established green power trading scheme, which traders say might emerge as the option of choice for generators tired of waiting for clarity on the nation’s offset market.

Australia Market Roundup: ACCU issuance numbers drop as WA launches support scheme for carbon farmers

Australia’s weekly offset issuances dropped far below average levels this week though new project registrations rose, while the Western Australia government launched a new voucher programme for soil carbon farmers.

Shell signs carbon trading partnership with Chinese steel giant

Oil major Shell has signed a partnership agreement with a major Chinese steelmaker that spans carbon trading, green steel, and EV charging facilities.

Leading China carbon analyst joins large SOE as trader

An experienced China carbon market analyst has joined the emissions trading desk at one of the country’s biggest power companies.

AVIATION

Aviation Roundup: Russia bans UK airlines from airspace, IAG results, MEP amendments, UK ETS update

Russia banned all UK airlines from using its airspace on Friday in a move that will significantly impact British flights to Asia and result in overall lower demand, though the impact on European carbon markets is as yet unclear.

VOLUNTARY

US mining company to explore soil carbon offset streaming model

A Nevada-based mineral exploration company on Thursday announced a new subsidiary to research and potentially execute carbon credit streaming investments in Western US rangeland projects.

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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

CONFERENCE

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

EMEA

DOA or “sleeping beauty”? – The $11-bln Nord Stream 2 gas pipeline is dead forever, a panel of experts unanimously agreed at a Euractiv-held conference, in the aftermath of Russia’s invasion of Ukraine. “I don’t see how it could be restarted. Maybe if Russia became democratic, but right now I support Chancellor Scholz’s decision to halt it”, said Andrius Kubilius, Lithuanian MEP. But experts noted that, with “40% of the European gas market being supplied by Russia”, the EU should promptly tackle concerns of supply security. ICIS author Aura Sabadus called on Brussels to reverse gas flows in the existing pipelines between Greece and Ukraine to ensure the country’s gas supply. Ilian Vassilev, a former Bulgarian ambassador to Russia added that the invasion of Ukraine is just the first move in Putin’s game and that its impact on the energy sector remained yet to be seen.  But in a separate Euractiv interview with the Russian ambassador to the EU, Vladimir Chizhov, he denied Nord Stream 2 was dead, and was rather a “sleeping beauty”. He also discussed his country’s military operation in Ukraine, plans to return to negotiations under another government in Kyiv, sending to court Volodymyr Zelenskiy, the effect of Western sanctions and more.

Energy saving ambition – The European Parliament’s lead negotiator, Denmark’s Niels Fuglsang, has proposed to raise the ambition of the EU’s energy efficiency directive to help curb the bloc’s dependence on imported fossil fuels. The European Commission proposed that the EU reduce final energy consumption 23% by 2030 compared to projected levels but Fuglsang wants to raise that to 43% and adds binding targets for individual countries. It hikes to 2% – compared with 1.5% in the Commission’s proposal – a target for countries to reduce energy consumption each year from 2024. (Reuters)

Farming credits – An EU carbon farming framework should be modelled on France’s existing voluntary scheme, according to French agriculture minister Julien Denormandie, Euractiv reports. France has made the issue a priority for its current presidency in the EU Council. Its carbon farming policy is part of its low carbon labelling system for the broader economy introduced in 2018 to help reach national emission targets. The voluntary system allows companies and other organisations to keep track of their carbon footprint, trade credits, and publish their progress in terms of emissions.

Inflation aberration – Energy annual inflation in the EU hit 27% in Jan. 2022, continuing the upward trend, the European Commission announced Friday. Following its lowest rate in five years in May 2020 (-11%), energy inflation started to increase but continued to show negative rates up until Feb. 2021. From Mar. 2021, energy inflation was positive and increased almost continuously, reaching 26% in Nov. 2021 and 27% in Jan. 2022.  The inflation rate for energy is the highest since the Harmonised Index of Consumer Prices (HICP) was first published in 1997. In Oct. 2021, it surpassed the highest point recorded so far: 17% in July 2008. Looking at the sub-components of energy, gas reached its highest point in Jan. 2022 at almost 41%, a 13.5 percentage point (pp) increase compared with the previous month, significantly above other energy sources – fuel (including petrol, diesel, liquid fuels and other fuels) at +26% (-2.8 pp) and electricity at +24% (+3.1 pp). Among the EU Member States, Belgium (67%) and the Netherlands (58%) registered the highest energy inflation rates in Jan. 2022, followed by Lithuania (43%), Estonia (41%) and Greece (40%). At the other end, the energy inflation rate was 0% in Malta, with Croatia and Portugal following, both with 12%.

AMERICAS

Ominous oral arguments – The US Supreme Court will hear oral argument on Monday in the case of West Virginia v. EPA. A coalition of 19 Republican-led states and coal industry interests contend that EPA’s authority should be limited under the Clean Air Act to regulate carbon emissions from the power sector. The decision by the conservative-leaning court to consider an argument about a hypothetical regulation that EPA has not even proposed is an ominous sign according to onlookers. “It’s unusual for the [S]upreme [C]ourt to hear a case where there is no active rule to challenge,” explained Richard Revesz, an environmental law professor at the New York University School of Law. “In normal times, when the court wasn’t so sceptical of regulation, this case would’ve been dismissed. It would have . . . pernicious consequences if it were allowed because it could severely restrict agencies’ ability to regulate and these power stations are such big emitters.” A favourable Supreme Court decision could significantly undermine the authority of President Joe Biden’s administration – and future administrations – to limit GHG emissions and abate an intensifying climate crisis. (Climate Nexus)

Kind of a big deal – Chevron is in advanced talks to buy Renewable Energy Group for about $3 bln, people familiar with the matter told Bloomberg, as the oil major looks to make a big bet on green diesel. A deal could be announced as soon as next week, the people added. No final decision has been made and the terms could change or talks could still fall through. Representatives for Chevron and Renewable Energy declined to comment. The deal would give a significant boost to Chevron’s push into renewable fuels, demand for which is expected to grow in the coming years as businesses and governments move away from oil and gas to cut carbon emissions. Chevron said last year that it expects to invest $10 bln through 2028 on low-carbon technologies. Based in Ames, Iowa, Renewable Energy describes itself as North America’s largest producer of advanced biofuels.

More like OUT-hofe – Oklahoma Senator Jim Inhofe (R) plans to announce his retirement sometime next week, Politico reports, leaving four years before the end of his term. The 87-year-old senator has long been an ardent oil and gas supporter, and for years he was perhaps the biggest opponent to action on climate change in Congress. He also frequently travelled to UN climate conferences to challenge the global efforts. His 2015 stunt of bringing a snowball to the Senate floor as evidence that climate change was a hoax drew headlines, but also sharp derision for failing to understand the science that shows how GHGs are altering the planet. He is expected to continue serving through the end of the current Congress.

From C to shining C-SAF – A consortium of 60 airlines operating and Canada and other aviation industry stakeholders on Thursday announced the Canadian Council for Sustainable Aviation Fuels (C-SAF).  The Council will aim to facilitate the production and supply of affordable, low-carbon, made-in-Canada SAF, and will also act as the voice of its members with governments and stakeholders to develop an ambitious strategy and roadmap for a profitable and sustainable SAF market in Canada.

ASIA PACIFIC

Hydrogen connection – Fortescue Future Industries has secured support from the Queensland state government in Australia to connect two proposed green hydrogen projects to the grid so that they can access supplies of renewable electricity, Renew Economy reports. In a deal struck with the state government-owned Powerlink and the Economic Development Queensland (EDQ), two new green hydrogen developments will be connected to the Queensland transmission network and supplied with renewable electricity. Queensland deputy premier Steven Miles said the connection agreement was a crucial component in the development of the renewable hydrogen facilities and the state government’s plans to establish itself as a ‘hydrogen and renewables manufacturing superpower’. “FFI are seeking to build a facility at Gibson Island to produce around 50,000 tonnes of renewable hydrogen per year. Connection to the transmission network is vital to allow green energy to power this facility,” Miles said.

Carbon neutral commitment – Chinese technology giant Tencent Holdings aims to become carbon-neutral across its operations and its supply chain by no later than 2030, the South China Morning Post reports. The internet and technology company, which owns and operates Chinese super app WeChat, was committed to using green power for all electricity it consumes by the end of the decade. “It is Tencent’s responsibility as a global technology leader to help the world achieve carbon neutrality, and it’s also an essential part of our vision to use ‘tech for good’,” Pony Ma, Tencent’s chairman and CEO, said in a statement. Tencent will reach this goal through energy efficiency, renewables-based electricity, and offsetting emissions that cannot be avoided.

AND FINALLY…

Ukraine – As Russian troops moved towards Ukraine’s capital Kyiv, climate campaigners, policymakers, are scientists are fleeing to safety, unable to carry on their work. Climate Home profiles some of the brave climate professionals in the country, some of whom have been woken up by explosions or are being forced from their homes this week. The Ukrainian government released a climate plan in August which aimed to grow the country’s economy without increasing its emissions. It planned a just transition from coal to renewables with spending on insulating Ukraine’s draughty apartment blocks. But the government’s future and its power to deliver the plan is now under severe threat. A Ukrainian parliamentary decree allows all government spending to be re-allocated to the military following the Russian invasion.

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