CP Daily: Friday April 29, 2022

Published 02:27 on April 30, 2022  /  Last updated at 02:31 on April 30, 2022  /  Newsletters  /  No Comments

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

**Due to numerous public holidays, CP Daily will not be sent on Monday, May 2**

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TOP STORY

FEATURE: Carbon border ambitions broaden as Russian aggression uproots global trade regime

Discussions on preferred trade flows have become front and centre since Russia’s invasion of Ukraine, with ideas on how to protect domestic production, ban imports, and increase energy independence shaking the foundation of WTO rules that would govern carbon border adjustments.

ASIA PACIFIC

Japan releases draft key report on carbon credit use, backs wide international access

A government-appointed study group has released a draft set of guidelines and principles for how Japan should make use of carbon credits to meet its climate targets, which paves the way for significant use of international offsets in the GX League and for other voluntary purposes.

CN Markets: Chinese carbon remains rangebound and lightly traded in the absence of new policy signals

Allowances in China’s national emissions trading scheme edged down marginally over the past week, but remained in the same range as in previous weeks with little going on to provide direction for traders.

NZ forestry, agricultural groups at loggerheads over exotics ban proposal  

Cutting exotic plantings from New Zealand’s ETS would come at a cost of tens of billions of dollars, according to a newly formed forestry lobby group, while the nation’s peak agricultural body is pushing for a two-year ban on the plantings.

Australian developer launches koala carbon project

An Australian carbon farming developer is launching a pilot programme combining carbon storage and koala habitat restoration work that it aims to earn ACCUs for.

EMEA

EU nations seek to dilute ETS climate spending provisions -leaked draft

EU member states want more flexibility over how they spend their carbon market auction revenue, according to a leaked draft document that suggests governments are pushing back on a proposal to earmark all EUA auction proceeds for climate purposes.

Borrowers beware: Some EU member states not started latest free allocations as 2021 ETS compliance deadline arrives

Countries made more progress over the past fortnight towards handing out this year’s free carbon permit allocations under the EU ETS, though a handful of governments have still not started the annual process, meaning emitters in those nations weren’t able to borrow from this year’s quota for 2021 compliance use.

Company Roundup: Energy firms book strong profits despite writedowns, mull rubles payment

Energy firms have made heavy writedowns on assets owing to Russia’s invasion of Ukraine but these were more than offset by strong profits due to high fuel prices, according to quarterly results published on Friday, while several EU companies are also considering paying for Russian gas in rubles.

Euro Markets: Carbon posts 10% monthly gain in April despite 50% plunge in ICE-traded volume

Carbon made a healthy advance late on Friday amid very light volume as the market eased into a long weekend, while energy markets weakened as traders continued to seek clarification over how to pay for Russian gas supplies without breaching EU sanctions.

Netherlands sets extensive exemptions for its industry CO2 tax

The Netherlands government set out wide exemptions to its carbon tax for industries for its inaugural year of 2021, with firms likely to face no additional financial burden for the period.

AMERICAS

California LCFS registers largest ever quarterly credit build during Q4

The California Low Carbon Fuel Standard (LCFS) recorded its biggest quarterly surplus in the 11-year history of the programme during the fourth quarter of 2021, according to data published by state regulator ARB Friday.

WCI emitters cut net long California carbon position, speculators add

Regulated entities reduced their California Carbon Allowance (CCA) holdings this week for the first time since late March, while financial players saw their collective net long position inch up, according to US Commodity Futures Trading Commission (CFTC) data published Friday.

VOLUNTARY

Climate Action Reserve provides path for ex-ante reforestation units to become offsets

Offset registry Climate Action Reserve (CAR) on Friday issued guidance for reforestation credits issued for forecasted emissions reductions to transition into the standard’s more traditional offset programme.

European firms complete world’s first carbon neutral juice shipment using biofuels, offsets

A leading European agricultural goods firm and shipping company have completed a biofuel trial, transporting a full cargo of orange juice from Belgium to Brazil and back, and offsetting the remaining emissions as part of the world’s first carbon neutral shipment of its kind.

AVIATION

Airlines face offset reliance through 2050 as SAF scale-up to fall short -report

Production of sustainable aviation fuel (SAF) will fail to scale quickly enough to meet soaring demand for flying over the next three decades, leaving the industry still relying on carbon offsets to meet net zero pledges by 2050, according to analysts at an investment bank.

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CONFERENCES

IETA European Climate Summit 2022 – May 24-25 in Barcelona: Join us for the 4th edition of this IETA-led European summit, bringing together leading private sector experts and policymakers from both the carbon and energy world, to analyse and discuss the current state of play, and what’s next for compliance and voluntary markets.  Why attend?  1. gain a comprehensive understanding of current and forecast carbon market drivers and developments; 2. how are we implementing our transition to a net zero economy, both on the ground and through policy; 3. understand the pricing evolution, risk profile, and investment opportunities across the compliance and voluntary carbon markets; 4. what/how/why of digital climate assets. www.europeanclimatesummit.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

Need a bit more… – Additional annual investments of $2.8 trillion are needed in low-carbon technologies and infrastructure to help the world meet net zero emissions goals, according to analysts at Goldman Sachs.  A global carbon price, continued focus on sustainability in the capital markets and improved emissions disclosures from consumer companies are also vital, said Michele Della Vigna, head of natural resources research in Europe, Middle East and Africa in Goldman’s global investment-research group. “Until now, global governments have failed to find the right framework,” he said during a webinar presentation Wednesday, according to Bloomberg. Vigna added that natural gas is an important transition fuel from coal to meet net zero goals. The Ukraine war “has bought back a more positive view of natural gas,” he said. “It’s important to manage carbon emissions down in a way that’s affordable.” Publicly traded companies, especially commodity producers and software and semiconductor manufacturers, need to allocate more to green capital expenditure, said Brian Singer, global head of GS SUSTAIN in the bank’s investment research group. “We see significant opportunities for public companies to invest,” he said. “They have spare capacity to spend $1 trillion extra in capex without straining their balance sheets.”

And a bit less – Global per-capita meat consumption must drop at least 75% to rescue ravaged ecosystems, address ever-worsening food insecurity, and keep Paris climate targets alive, says a new study from the University of Bonn. Meat consumption continues to accelerate despite comprehensive studies showing it is terrible for the climate, environment, and human health – a trend that bodes ill for all three, according to research by agricultural economists Matin Qaim and Martin Parlasca published in the Annual Review of Resource Economics. “If all humans consumed as much meat as Europeans or North Americans, we would certainly miss the international climate targets and many ecosystems would collapse,” Qaim said. The new study found that, without a serious correction, demand for meat will continue to rise out to 2050, despite overwhelming evidence connecting a meat-heavy diet with chronic disease. The researchers also found that producing one kilogram of beef generates 10 times more emissions than an equivalent amount of rice. As drought and extreme heat, as well as floods and high winds, worsen in many of the world’s most important “bread baskets,” food insecurity is deepening with the climate crisis, the study warns. (Energy Mix)

EMEA

If it ain’t broke… – The EU’s integrated electricity market has helped mitigate energy prices, bringing benefits estimated at €34 bln per year, according to a report by the EU’s energy regulators that outlined 13 measures to alleviate the ongoing price crisis. The EU Agency for the Cooperation of Energy Regulators (ACER) delivered its conclusion on the role played by wholesale electricity markets in the ongoing energy price crisis, exacerbated by Russia’s war in Ukraine. The report states that whilst the current circumstances impacting the EU’s energy system are far from normal, ACER finds that the current electricity market design is not to blame for the current crisis. On the contrary, the market rules in place have to some extent helped mitigate the current crisis, thus avoiding electricity curtailment or even blackouts in certain quarters, the agency added. (EurActiv)

Shipping in please – The European Parliament’s cross-party transport committee (TRAN) has voted in support of European Commission proposals to bring shipping emissions into the current ETS, by bringing in emissions from intra-EEA voyages and half of the emissions of ships arriving and departing from the bloc. This defied industry concerns that such a global scope could damage relations with trade partners and efforts to curb emissions at a global level. However, TRAN did adopt an industry-supported amendment to split the costs of compliance between shipowners and charterers, rather than just shipowners. TRAN’s opinion must be taken into consideration by the Parliament’s environment committee (ENVI), the senior parliamentary body on the EU ETS reform file. ENVI is due to vote on May 16-18 ahead of a full Parliament vote in June and final negotiation with member states in the autumn.

Dirty mandate – A vast majority of RWE shareholders have rejected a request to force the power generator’s management to start preparations for a spinoff of the company’s brown coal activities, but major investors agreed with criticism that the company’s shift to renewables was too slow, Clean Energy Wire reports. At the company’s annual general meeting, almost 98% of the voting share was against the initiative by activist shareholder Enkraft, RWE said. Enkraft wanted to force RWE to present a draft spinoff plan within a year, arguing that the division is economically negligible in the long term, poses a financial risk, and is environmentally questionable. The investor, which holds 0.03% of RWE shares, argued that RWE’s transition to renewables is not rapid enough.

Worse than thought – The EU’s proposed green aviation law overlooks the true climate cost of flying, with the non-CO2 effects of air travel producing two to four times the impact of carbon emissions, a Green MEP has said. Ciarán Cuffe, a Green MEP who is shadow rapporteur for the ReFuelEU Aviation file in the European Parliament’s transport committee, has called for the EU’s clean aviation fuels law to be amended to include so-called non-CO2 effects. This includes the release of soot and harmful gases, including sulphur and nitrogen oxide, as well as water vapour, from jet engines. At high altitudes, these emissions can cause the formation of contrails, which have a net warming effect much larger than CO2, according to a 2020 EU study. The emissions can also damage human health, which is of particular concern to those living in the vicinity of airports. The Irish MEP has tabled an amendment mandating a progressive reduction of the aromatic and sulphur content of aviation fuels, two elements responsible for much of the non-CO2 pollution released by planes. Under Cuffe’s amendment, aromatics would be capped at 8% of kerosene by 1 June 2023, down from the standard of roughly 20% at present. (Euractiv)

ASIA PACIFIC

Climate snub – A group of former Pacific Island leaders have slammed Australia and other regional powers for failing to address the “real threat” posed by climate change, while posturing around national security, Renew Economy reports. The group, including former leaders of the Marshall Islands, Palau, Kiribati, and Tuvalu, as well as the former Secretary General of the Pacific Island Forum, Dame Meg Taylor, say climate change presents the greatest security threat to Pacific Island states. They want the Pacific region’s major powers, Australia, China, and the United States, to ramp up their efforts to cut their GHG emissions, and stop interfering with countries negotiating their own national security arrangements. In a joint statement, the group said the diplomatic stoush between Australia, China, and the United States – triggered by an agreement signed between China and the Solomon Islands – ignored the “real threat to the region caused by climate change.”

Hydrogen JV – Air Liquide, a French supplier of industrial gases and services, set up a joint venture with Lotte Chemical, a major chemical company based in South Korea, to establish a supply chain by utilising by-product hydrogen for hydrogen vehicles, Aju Business Daily reports. It is the first step of cooperation following an agreement on their strategic alliance in May 2021. Lotte Chemical said that a ceremony took place in Seoul on Apr. 29 to set up the joint venture with Air Liquide Korea. The French company controls 60% of the joint venture and Lotte Chemical owns 40%. The size of their investment was not disclosed. The joint venture will build shipping centres in Lotte Chemical’s production bases in Daesan and Ulsan to temporarily store by-product hydrogen before shipments. The two companies would develop and expand hydrogen mobility markets.

Sprng forward Actis, a global investor in sustainable infrastructure, has agreed to sell Solenergi Power Private Limited, the flagship company for its Sprng Energy platforms, one of India’s largest renewable energy companies, to Shell Overseas Investments for $1.55 bln. Sprng Energy supplies solar and wind power to electricity distribution companies in India. Established by Actis in 2017, Sprng has grown to encompass more than 2.9 GW-peak in assets, with a further 7.5 GWp of renewable energy projects in the pipeline, which will support the company’s aim to provide a meaningful contribution to the 500 GW of renewable energy capacity the Indian government is targeting by 2030.

Coal levy – The Australian Greens have announced they will push for a new levy on coal exports to fund climate disaster recovery and clean energy exports if they hold the balance of power after the federal election next month. The Guardian reports that the Greens climate policy expects such a levy would add $51.9 bln to the nation’s coffers and create 805,000 new jobs. Party leader Adam Bandt said the Greens were the only party talking seriously about addressing climate change and the package dismantled the argument that action should be delayed. The levy would be placed on thermal and metallurgical coal that would start at A$1/t and $3/t respectively in the first year and increase annually. It would be coupled with a plan to phase out thermal coal exports, with a yearly export cap to cut the maximum annual thermal coal exports from 230 mln tonnes in 2023 to zero by 2030.

AMERICAS

SCC to SCOTUS – Louisiana and other Republican-controlled states on Thursday asked the US Supreme Court effectively to block President Joe Biden’s administration’s social cost of carbon metric in regulations, putting a core part of the president’s climate agenda in front of the conservative-dominated high court. The strongly worded application portrays the social cost as “the most consequential rulemaking in American history” that touches on many aspects of American life. It’s unclear whether SCOTUS will bite given that the Fifth Circuit, widely considered the most conservative appellate court, recently found that the states lacked standing because the social cost metric on its own does not represent imminent harm. The court has ordered the Biden administration to file a response by May 9. (Politico)

Canyon comeback? – With the threat of power shortages looming and the climate crisis worsening, Gov. Gavin Newsom may attempt to delay the long-planned closure of California’s largest electricity source: the Diablo Canyon nuclear plant. Newsom told the LA Times editorial board Thursday that the state would seek out a share of $6 bln federal funds meant to rescue nuclear reactors facing closure, money the Biden administration announced this month. Diablo Canyon owner Pacific Gas & Electric is preparing to shutter the plant – which generated 6% of the state’s power last year – by 2025. The requirement is by May 19 to submit an application for the federal funds, but Newsom said state officials could decide later whether to pursue that option. And a spokesperson for the governor clarified that Newsom still wants to see the facility shut down long term. It’s been six years since PG&E agreed to close the plant near San Luis Obispo, rather than invest in expensive environmental and earthquake-safety upgrades.

Carbon-free Connecticut – Connecticut lawmakers voted Thursday to officially set a target of 2040 for having a carbon-free electricity supply, despite scepticism about whether the state can meet that goal and whether ratepayers can afford the cost. The legislation, which codifies an executive order issued in 2019 by Democratic Gov. Ned Lamont, would make Connecticut the 11th state to set the ambitious objective. The governor said he plans to sign the bill into law in the coming days. (AP)

Blending beckons – The US EPA is expected to send Renewable Fuel Standard (RFS) biofuel blending mandates for 2020, 2021, and 2022 to the White House for final review by early next week, two sources familiar with the matter told Reuters. The federal judge earlier this week approved a consent decree that compels the agency to publish the blending quotas by June 3.

SCIENCE & TECH

Built to spill – Climate change will cause thousands of new viruses to spread between animal species, increasing the risk that new diseases will infect humans, potentially setting off another pandemic, a study published Thursday in Nature finds. At least 10,000 viruses are capable of infecting humans but the vast majority are circulating only among wild animals. Over the next 50 years, with 2C of warming above preindustrial levels, researchers found cross-species virus spread – among mammals alone – would occur more than 4,000 times. The increased risk of what scientists call ‘zoonotic spillover’ from wild animals to humans will be caused by warming temperatures forcing animals to migrate to new regions and habitats as well as increased human intrusion into, and destruction of, animal habitat. (Climate Nexus)

PODCAST

A man, a plan, a canal, a carbon price – In this mini episode of the Pricing Nature podcast, Casey and Jacob discuss with Maxim Rebolledo of the Panama Canal the implications of private actors pricing GHG emissions. Pricing Nature is a limited-series podcast from the Yale Center for Business and the Environment, the Yale Carbon Charge, the Yale Tobin Center for Economic Policy, and the Carbon Pricing Leadership Coalition.  Featuring conversations with carbon pricing experts from government, academia, and civil society, the podcast tells a story about the economics, politics, and history of carbon pricing, which many argue should play a critical role in any national climate policy. Season One focused on carbon pricing theory. Season Two explores carbon pricing beyond cap-and-trade and carbon taxes. Pricing Nature is available on Apple Podcasts, Spotify, and wherever else you listen to podcasts.

AND FINALLY…

In the rich man’s world On Friday, members of Money Rebellion, a group within Extinction Rebellion specifically targeting financial institutions, disrupted HSBC’s AGM in central London to demand that the banking and financial services giant stop investing in new fossil fuel projects immediately. Shortly after the AGM began, a flash mob of singers interrupted HSBC Chairman Mark Tucker’s speech, singing a revised version of the Abba hit Money, Money, Money. Outside the venue attendees were greeted with a banner bearing a quote from Kurt Vonnegut which read: ‘Dear future generations, please accept our apologies. We were rolling drunk on petroleum.’ Performers gathered outside the venue from 11am dressed as bankers with cigars and champagne flutes full of fake oil and toasted their fossil-fuelled profits as HSBC management and shareholders filed into the venue. According to Extinction Rebellion, in 2021 alone HSBC invested nearly $18 bln in the fossil fuel industry, and last May news leaked that HSBC had stakes in companies planning 73 new coal power plants. “The multinational banking and financial services firm also remains a major banker for Saudi Aramco and Exxonmobil, which are ranked first and fourth respectively in the ‘Carbon Majors’ database of fossil fuel companies responsible for global carbon emissions since 1965.”

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