CP Daily: Friday April 22, 2022

Published 12:10 on April 24, 2022  /  Last updated at 12:10 on April 24, 2022  /  Newsletters  /  No Comments

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

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TOP STORY

PREVIEW: Nations push paper, not ambition, in efforts to curb shipping emissions

Governments are not short of ideas for a revised strategy to reduce GHGs from international shipping, but a proposal for a carbon pricing mechanism by a powerful group of nations led by China appears to fall short on ambition, according to documents reviewed by Carbon Pulse.

EMEA

Euro Markets: EUAs reach 8-week high amid sustained speculative buying

EUAs advanced to reach an eight-week high on Friday as speculative buying continued to drive prices after Wednesday’s 9.5% jump, while energy markets fell after the EU issued guidance that appeared to say companies could meet Russian demands to pay for gas in rubles without breaching sanctions.

REPowerEU: Brussels aims higher in effort to rid the EU of Russian fossil fuels

As EU officials rush to hammer out the details of a new strategy to rapidly curb the bloc’s Russian energy imports, the mooted measures to massively increase renewables while cutting unnecessary energy demand leave experts uncertain about how this will impact the bloc’s carbon market.

UK’s carbon market emissions rise 4% in 2021

(Updates Thursday’s story in CPD with further insights from verified data)

AMERICAS

Pennsylvania tees up RGGI regulation publication to facilitate July entrance

Pennsylvania on Friday posted its final-form RGGI rulemaking ahead of its weekend publication, aiming to link with the 11-state power sector carbon market by Q3 as legal challenges to the programme loom.

US touts new nature-based spending one year on from NDC climate promise

One year after President Joe Biden announced a new 2030 target for limiting US emissions under the Paris Agreement, he rounded off a week-long climate policy push on Friday with an announcement to protect old growth forests and advance other nature-based solutions to tackle the climate crisis.

Regulated entities extend California carbon, RGGI net long positions

WCI emitters added to their California Carbon Allowance (CCA) holdings for the third straight week, as compliance players in the RGGI programme also boosted their net length, according to US Commodity Futures Trading Commission (CFTC) data published Friday.

RFS Market: RIN prices lift to 8-mth highs as Indonesia halts palm oil exports

US biofuel credit (RIN) prices on Friday jumped to highs not seen since last summer as traders reacted to Indonesia President Joko Widodo’s announcement of a forthcoming ban on cooking oil exports, driving up prices for other biodiesel inputs.

ASIA PACIFIC

Chinese power companies post huge carbon trading windfall earnings

Several major coal-fired power producers in China have reported large carbon trading related revenue for 2021, reflecting the benefits for efficient coal plants in the nation’s intensity-based emissions trading scheme.

CN Markets: CEAs flat as China’s carbon market enters hibernation

Spot allowance prices in China’s emissions trading market have not moved for almost two weeks, as the long wait for clarity on the next trading period drains liquidity bar the occasional block trade.

Australia seeks partners for Vietnam carbon market push

The Australian government has issued a call for partners to co-fund initiatives aimed at developing carbon market opportunities or offset projects in Vietnam.

Australia’s Labor party says would exempt coal sector from tougher carbon market regulations

The Australian opposition Labor party has said that if it wins next month’s election, the nation’s coal mines will not be affected by its Safeguard Mechanism policy forcing large polluters to either decarbonise or offset their emissions, due to them being classified as a trade-exposed industry.

Maori forestry group pushes back against exotic ban proposal in NZ ETS

A newly formed Māori forestry group is urging the New Zealand government to drop its proposal of excluding exotic species from the country’s emissions trading scheme, saying it would impact community livelihoods.

VOLUNTARY

Elon Musk-backed carbon removal prize awards $15 mln to 15 projects

A prize set up to scale innovative carbon removal solutions has awarded $15 mln to 15 different projects including nature-based, blue carbon, and air capture solutions in the latest round of a competition worth a total $100 mln.

ACX to support first offset sales that address the non-CO2 impact of flights

Singapore-based carbon exchange AirCarbon has partnered with an aviation technology firm to support the world’s first trades of blockchain-based carbon offsets generated from the prevention of aircraft contrails that account for up to 60% of aviation’s climate impact.

Crypto carbon bridge joins business group IETA

The Switzerland-based non-profit that has bridged the majority of real-world offsets onto blockchain to date has become a member of the International Emissions Trading Association (IETA), a sign that the traditional carbon market is accepting the emergence of cryptocurrency initiatives.

COMMENT

Risk of surplus in the EU ETS: a short story

The EU’s carbon market reform is going the wrong way by not properly addressing the system’s surplus, argues Adrien Assous, executive director, Sandbag Europe.

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CONFERENCES

City Week 2022: Resetting Priorities for a Better Future – Apr. 25-27 at London Guildhall: Now in its 12th year, City Week is the premier gathering of the international financial services community. Organised in partnership with the UK Government and leading City institutions, City Week brings together industry leaders and policy makers from around the globe to consider the future of global financial markets. Each day will address a specific theme, with Day 1 focussing on “Meeting the climate change challenge – the role of financial services in achieving net zero”. www.cityweekuk.com

Reuters Events: Global Energy Transition 2022 – June 14-15 in New York City: The conference unites CEOs and changemakers from the energy, industrial, and government ecosystems to shed light on the defining issue of our time, and help companies meet a uniquely difficult challenge. Over two days and five critical themes, we will define the future of energy, inspire a decade of action, and prepare the sector for challenges still to come, with diverse voices from around the world bringing passion and expertise to deliver a new path forward. Find out more by visiting the website today: https://bit.ly/35H7cgb

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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

Glencore, do more The world’s biggest climate action investor group will back a shareholder challenge to Glencore’s slow progress in scaling back coal production at the miner and trader’s annual general meeting on Apr. 28, two sources familiar with the matter told Reuters. Climate Action 100+ (CA100+) will flag to members – who manage $68 trillion in assets and can put pressure on the company to change its strategy – its concern that Glencore’s emissions targets and coal production are not consistent with the world’s climate goal, the sources said. While there is no obligation on shareholders to vote in a certain way based on the CA100+ view, the public move by the group is an important one as it reverses previous support for Glencore’s strategy. Glencore last year said it planned to run down its thermal coal mines by the mid-2040s and hit net zero emissions by 2050. The company’s first climate action plan, published in Dec. 2020, had received 94% of votes in Glencore’s favour from shareholders at its 2021 AGM. The non-binding management vote at its upcoming AGM seeks support for its efforts so far.

EMEA

We need to talk about U8 – The European nuclear power sector is highly dependent on imports of Russian uranium, according to a report by NGOs Friends of the Earth Germany (BUND), the Nuclear Free Future Foundation, the Rosa Luxemburg Foundation, Greenpeace and Ausgestrahlt. In 2020, EU countries received 20.2% of their uranium needs from Russia and another 19.1% came from Russian ally Kazakhstan. The dependency on Russian uranium is highest in Eastern Europe, where 18 nuclear plants are calibrated to use the hexagonal fuel elements provided by Rosatom. This Russian state corporation also has shares in uranium mines in Canada, the US, and Kazakhstan, making it the second largest uranium producer in the world, the report states. More than a third of the global demand for enriched uranium, which is needed for the operation of nuclear plants, comes from the Russian company. According to German nuclear power plant operator PreussenElektra, Germany’s three remaining reactors are also mainly running on Russian and Kazakh uranium. Unlike the embargos on Russian fossil fuels, cutting dependency on Rosatom has been little discussed since president Vladimir Putin’s decision to invade Ukraine and there are currently no sanctions on Russian nuclear fuel imports for civil use. Despite calls to keep the existing nuclear power plants running to save on coal and natural gas, Germany’s government remains steadfast in its decision to close down the country’s last nuclear plant at the end of this year. (Clean Energy Wire)

Pen power – French oil major TotalEnergies on Friday published a letter pledging to publish an annual report on its energy transition strategy including 2025 and 2030 targets on cutting emissions across Scopes 1, 2 and 3. The move prompted a group of 12 French minority shareholders to withdraw their proposal to the company’s shareholders’ meeting asking it to publish more details regarding its investments to combat climate change. (Reuters)

Car climbing – Germany’s Volkswagen Group aims to cut CO2 emissions from car production much faster than previously planned. The world’s second largest carmaker has raised its targets for 2030 emission cuts in production and energy supply to 50% from 30% compared to 2018 levels. The independent Science Based Targets initiative (SBTi) has confirmed that VW’s new targets for internal operations (so-called Scope 1 emissions) and energy supply (Scope 2) are aligned with the aim of limiting global warming to 1.5C, up from SBTi’s previous assessment of VW’s targets as corresponding to a “below 2C” ambition level. (Clean Energy Wire)

Default dangerA Bank of Italy study investigates the potential impact on Italian banks’ business loan default rates at the sector level, following the introduction of a carbon tax. The bank performed a counterfactual analysis building on its microsimulation model, which estimates the share of financially vulnerable firms and their debt. Assuming that the Italian government introduced a carbon tax of €50 per tonne of CO2 in 2018, the bank’s estimates show that the average quarterly loan default rate for the firms analysed would have increased by around one quarter in 2019 (from 2.8% to 3.6%). Even considering a tax equal to €800/tonne – “an assumption coherent with a disorderly transition scenario” – the default rate would have remained below the historical peak of about 9.5% recorded in 2013. However, these impacts could be more severe if the carbon tax were introduced in periods characterised by higher firm vulnerability or more elevated default rates.

ASIA PACIFIC

Timber! Land clearing approvals in the Australian state of New South Wales has now hit more than half a million hectares, threatening biodiversity and emissions reduction targets. The Sydney Morning Herald reports that government data shows more than 646,418 ha have been approved between Mar. 9, 2018 and Apr. 1 2022. Most of the land approved for clearing is for native invasive species management, making up about 495,935 ha, while pasture expansion totals around 106,646 ha. Clearing of woody vegetation in NSW has been steadily increasing since 2015, with the latest State of the Environment report pushing for significant action to meet emissions reduction targets in sectors including agriculture, energy, and land clearing.

Sun Cable rival A joint venture between Indonesia’s Quantum Power Asia and Germany’s ib Vogt, is proposing to build a version of Sun Cable’s Australia-Asia PowerLink Project. RenewEconomy reports that the $5 bln project proposes to export up to 4 TWh or renewable energy to Singapore annually using solar installed across over 4,000 ha in the Riau Islands, south of Singapore. Quantum Power and ib Vogt said on Tuesday that the solar and storage project would be capable of generating more than 3.5 GW and storing 1 2GWh of renewable energy which would be piped to Singapore via an undersea cable. The project bears a striking resemblance to Sun Cable’s A$30+ bln Australia-Asia PowerLink project in Australia’s Northern Territory, which also aims to export solar power by undersea cable to Singapore, and has been flagged as likely to begin construction in late 2023.

New fund – The Oil & Gas Climate Initiative’s Climate Investments arm (OGCI CI), alongside its partners China National Petroleum Corporation and Hainan Free Trade Zone Development Equity Investment Fund Partnership, have launched the OGCI China Climate Investments fund (CCI). CCI will follow the successful model deployed by OGCI CI’s first vintage international fund, focusing on driving near-term GHG impact across methane and CO2 reduction, the and recycling or storage of CO2. CCI will also support the development, demonstration, and rapid expansion of these technologies and projects into real-world applications. OGCI CI was formed by the OGCI, a CEO-led initiative of oil and gas majors that accounts for around 30% of global operated production. OGCI aims to lead the industry’s response to climate change.

AMERICAS

On hold – The release of the American Petroleum Institute’s (API) drafted carbon tax proposal, which would see a levy of $35-50/tonne placed on entities such as gasoline wholesalers and power plants, is likely to be delayed until after the November US midterm elections, according to Inside EPA. Some API members want to postpone action on the proposal amid near-record prices at the pump, contending it could alienate not only voters but Republican lawmakers friendly to the oil industry, according to people involved in the discussions or who were briefed on them. The proposal was originally reported by the Wall Street Journal on Thursday, after it was approved by the API’s climate committee last month, though it may still need to be signed off by API’s executive committee.  The oil industry lobby group last year formally embraced an “economy-wide government carbon price policy” as an alternative to other climate mitigation options. The tax proposal comes despite the fact that such measures stand virtually no chance of passing through Congress, with Republicans predicted to regain control of one or both legislative houses in the upcoming elections. (Politico)

Aspirations and reality – Michigan Governor Gretchen Whitmer’s (D) administration on Thursday released its roadmap to statewide carbon neutrality, calling for electric vehicle incentives, stronger renewable energy targets for the energy sector, job training to prepare workers for the post-combustion economy, and other efforts to wean the Great Lakes State off fossil fuels by 2050, Bridge Michigan reports. The plan, building on a draft published in January, stems from Whitmer’s vow to make Michigan carbon neutral by 2050, with a nearer-term goal of reducing emissions 52% from 2005 levels by 2030. The plan calls for Michigan legislators to implement a clean fuel standard for the transportation sector. However, Republicans control Michigan’s heavily gerrymandered General Assembly, eliminating the chances the state could enact such a climate policy through legislative means.

Dodgy accounting – Canada’s 2020 GHG emissions dropped, in part thanks to trees removing carbon from the atmosphere. But environmentalists are quick to point out this calculation excludes a huge chunk of emissions from the logging industry. Nearly 7 Mt of CO2 was removed by the land use and forest sector, an amount that reduced the country’s total emissions by 1%, according to the federal government. Environmental groups, however, say the sector’s true GHG emissions are under-reported by a staggering amount — approximately 80 Mt of CO2 each year. A 2021 study from four national and international climate groups examined how the government counts emissions and found it excludes large, high-emitting wildfires and those from widespread death and decay caused by insects and disease. Canada designates “large areas” of unprotected primary forests that haven’t been subject to human interference as “managed.” It takes credit for carbon removal in those areas but ignores large sources of emissions, the report says. Because natural disturbances such as fire, insects, and disease are not human-caused, the federal government omits the emissions they cause to the tally. Yet when trees in wildfire-affected areas regrow naturally, Natural Resources Canada takes credit for the CO2 they suck up, which the report says goes against the IPCC’s guidelines. Environment and Climate Change Canada spokesperson Oliver Anderson responded that Canada’s forest carbon reporting is consistent with IPCC guidance and is subject to annual international expert review, similar to other countries reporting under the UNFCCC. (National Observer)

A tough sell – The School of Public Policy of the University of Calgary has released a report on why Alberta farmers are reluctant to use carbon credits that can potentially help lower emissions. The report authors provide a comprehensive review highlighting the gaps in existing knowledge related to agricultural offsets. “There has been little exploration to date of the effectiveness of using carbon credits to encourage Alberta farmers to practice farming techniques that lower emissions, while earning extra revenue without jeopardizing their agricultural output,” the Lethbridge Herald reports. The authors state that despite there being an active offset market in Alberta, farmers there hardly participate. This appears to be partly due to a history of regulatory risk: the agriculture sector has seen the revocation of carbon credit eligibility for certain practices, and invalidated credits can lead to significant financial losses for farmers. They add that farmers are also reluctant to participate due to the inadequacy of offset revenues in covering the foregone costs of implementing emissions reduction practices given current offset prices and the emissions per farm. As the province with the most beef cattle, the second-largest number of farms and farmed area in the country, and as one of Canada’s biggest producers of crops, Alberta is a huge part of the national agriculture sector. It has also been responsible for the highest level of agricultural GHG emissions in Canada. According to the report, some lower-carbon farming protocols have proved profitable for farmers by improving efficiency, even without offset incentives. But while farmers may adopt these practices for their own reasons, they are reluctant to participate in Alberta’s offset market unless they are sufficiently rewarded. “Alberta policymakers should emphasise the intrinsic efficiency benefits to farmers of implementing these protocols for their own sake. Convincing farmers in the province to invest in emission-reducing technologies for the purpose of making money in the current Alberta carbon market will, for the time being, remain a difficult sell.”

Leak hunters – Energy infrastructure company Kinder Morgan this week announced that it has joined a collaboration with Cheniere Energy, several other midstream operators, methane detection technology providers, and leading academic institutions on a project focused on quantifying, monitoring, reporting and verifying (QMRV) greenhouse gas emissions associated with the operation of natural gas gathering, processing, transmission, and storage systems. The work is intended to improve the overall understanding of GHG emissions and further the deployment of advanced monitoring technologies and protocols. The midstream QMRV work will be conducted by global emissions researchers from Colorado State University and the University of Texas. The measurement protocol designed by the research group and Cheniere will be field-tested at facilities operated by the participating midstream companies. KMI assets involved in this project include select pipeline segments and compressor stations on the Tennessee Gas Pipeline (TGP), Kinder Morgan Louisiana Pipeline (KMLP) and Natural Gas Pipeline of America (NGPL) systems.

VOLUNTARY

DAC on deck – The cost of Direct Air Capture (DAC) technology is expected to drop as low as $250-300/mtCO2e by the end of this decade for a range of a multi-megaton capacity, Barbara Truyers, manager for strategic partnerships at Climeworks, told S&P Global Commodity Insights. Climeworks, which captures CO2 directly from the air, is a pioneer in DAC technology, building its first plant in Iceland – the 4,000 mt/CO2e Orca plant launched in Sep. 2021. Credits from this plant, sold on a forward basis, are already all sold out, Truyers said. While prices of Orca credits have not been disclosed to the market, she said that their price varies by the amount purchased and duration of the contract. The price of Climeworks carbon credits is strongly impacted by the high cost of developing the plants, Truyers added, but these prices are expected to drop over the coming years, thanks to economy of scale and increased efficiency. She added that prices may drop further – possibly to $100-200/t – if further industrialisation within the ecosystem of this emerging industry will be achieved. “An entire carbon removal industry will need to develop over a period of the next 10-20 years, creating capacities of at least 5 billion tons of carbon removal by 2050,” she added. While Climeworks has already put more than 15 small scale direct air capture plants into operation across Europe, more plants will be built in global locations, with a target of scaling up their dimensions to 10 times bigger than the Orca plant. These larger scale plants will be ready in two to three years, according to Truyers.

Kelpy in the sea with diamonds – De Beers Group announced it is investing $2 mln in Kelp Blue, an innovative start-up focused on growing and managing large-scale giant kelp forests, initially off the Namibian coast. “These underwater forests have the potential to safely and permanently lock away vast amounts of CO2 in the ocean. Research has shown that kelp forests have carbon sequestration properties exceeding those of terrestrial forests and that they help sustain healthy marine ecosystems, providing food and shelter for countless species,” the diamond company said in a press release. In 2021, Kelp Blue was awarded a licence to cultivate Giant Kelp off the coast of Namibia and is now in the pilot phase. The initiative will also support De Beers in its goal of being carbon neutral across its operations by 2030.

SCIENCE & TECH

Tracking methane – Paris-based Kayrros, a climate and energy data analytics company, has concluded a new €40 mln financing round that includes the French government via its Tech Souverainete fund, the company said in a press release. The funds will support Kayrros’ geospatial detection technologies, which analyse satellite images and other data to assess the climate impacts resulting from economic activity. The firm works with the European Space Agency (ESA) to identify, analyse and measure greenhouse gases, particularly methane. The funding programme is part of the France 2030 framework led by the General Secretariat for Investment (SGPI) and operated by the French Public Investment Bank, with other investors including the European Investment Bank (EIB), and Opera Tech Ventures, the venture capital arm of BNP Paribas group.

Keeping cool – Forests — and tropical forests in particular — have garnered a lot of attention lately for the role they can play in dampening climate change. They mop up as much as a third of the CO2 that we humans add to the atmosphere, mostly through the burning of fossil fuels. And yet, we’re continuing to cut them down at a terrifying clip. In a recent study published Mar. 24 in the journal Frontiers in Forests and Global Change, Deborah Lawrence, an environmental scientist and professor at the University of Virginia, and her colleagues showed that, without forests, the global temperature would be around 0.5 C (0.9 F) higher. Locking away climate-warming carbon in forests helps to keep a lid on temperatures. But Lawrence said that’s only part of the story. A suite of forests’ “biophysical mechanisms,” as scientists call them, also play a role, altering the temperatures and weather that we and other living things encounter on the ground. For example, as trees draw water from the forest floor through their roots and up to the canopy in a process called evapotranspiration, it pulls heat away from the ground. While that heat doesn’t leave the global climate system, this process does impact the temperature in and around forests. Similarly, the way forests reflect or absorb sunlight, the chemicals they release and their contribution to cloud formation can make for wildly different sensations at Earth’s surface. (Mongabay)

AND FINALLY…

Carbon fraud on the small screen – TV series production company Kelija Productions, part of Asacha Media-owned Kabo Family, has acquired the exclusive adaptation rights to Julie Madar’s book about French carbon fraudster Marco Mouly and his run from the law. In 2016, Mouly was sentenced to eight years in prison for embezzling hundreds of millions of euros from the French government – cash made through committing carousel fraud via the EU ETS around 2010. Deeming his sentence too harsh, the conman – one of several behind what was labelled France’s ‘crime of the century‘ – managed to flee the country without a passport, spending his first few weeks on the run as a millionaire holidaymaker across Europe, with the intention of eventually claiming asylum in Israel. Mouly spent the next five months in 14 different countries, until he was arrested by Interpol in Geneva.  He was also the subject of a Netflix documentary – Lords of Scam – which was released last year. (TBI)

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