CP Daily: Friday May 20, 2022

Published 00:32 on May 21, 2022  /  Last updated at 00:36 on May 21, 2022  /  Newsletter  /  No Comments

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

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TOP STORY

Brazil government invites sectors to set own emissions goals under Paris pledge

The government of right-wing Brazilian President Jair Bolsonaro wants all the country’s economic sectors to set their own emissions goals provided the targets collectively deliver its pledge to the Paris Agreement.

SHIPPING

Governments near a UN deal on pricing shipping emissions -observers

Prospects for a global carbon pricing regime for shipping have improved markedly following a week of closed-door talks at the International Maritime Organisation (IMO), an advisory group said on Friday.

INTERNATIONAL

GCF approves $300 mln to new climate projects, adopts private sector strategy

The Green Climate Fund (GCF) has approved $301 million in funding to go towards new climate projects, while adopting a strategy framework for private sector involvement and simplified the project approval process for some host countries.

VOLUNTARY

VCM initiative delays publication of Core Carbon Principles to Q4

The cross-stakeholder Integrity Council for the Voluntary Carbon Market (IC-VCM) updated its timeline for publishing its long-awaited carbon offset quality standards on Friday, delaying their release by one quarter to Q4, with the public consultation on draft guidelines pushed back two months to July.

Malaysia’s Sarawak state passes landmark bill to buck trend on forest carbon for VCM

The Malaysian state of Sarawak will be the Southeast Asian country’s first jurisdiction to establish rules for forest carbon activity with the successful passage in the state’s legislative assembly of a forestry bill on Thursday.

VCM demand bulge for carbon removals needs integrity pairing -report

There are no durable CO2 removal credits being offered from projects issuing carbon credits in 2021-22 on the voluntary carbon market (VCM), according to a report that assesses trends across the four largest offset registries, and also points out other challenges with carbon offset supply.

Compliance markets alone to double global use of carbon credits, says bank

Rules that allow offsets in five compliance markets, including China, could drive nearly as much demand for carbon credits as were issued under the entire voluntary carbon market (VCM) last year, a bank report found Friday, adding that the trend is likely to rise.

UPDATE – Carbon spot exchange CBL cancels late Thursday trades following investigation

*Updates Thursday’s story in CP Daily with further information on the cause of the cancelled erroneous transactions*

Xpansiv market CBL cancelled executions made late Thursday after conducting an investigation regarding “potentially erroneous transactions.”

EMEA

EU carbon investment fund’s holdings drop 17% amid proposals to restrict financial access to ETS

A carbon investment vehicle that holds physical EUAs has seen its holdings fall by 17% in the two days after the European Parliament’s environment committee proposed restricting speculative access to EU ETS registry accounts.

Euro Markets: EUAs post 9% weekly loss as MSR sales proposal outweighs EEX’s 2020 auctions cut

European carbon prices sank 9% over the week to test key support at the close of business on Friday, as traders balanced a cut of 3% in 2022 auction volumes with the prospect of a 200-250 million-tonne injection of additional auction supply in the coming four years.

EU Parliament vote reignites debate on role of carbon removals

The European Commission should assess and spell out how to enhance carbon dioxide removals (CDR) in a new legislative proposal by no later than 2025, the European Parliament’s environment committee (ENVI) said in a vote on the bloc’s carbon market earlier this week.

Steelmakers should enjoy ‘scrap bonus’ under EU ETS, says German trade group

A German steel sector trade association has proposed the European Commission introduce new incentives into the EU ETS to encourage the use of scrap materials, according to reports.

ASIA PACIFIC

CN Markets: Low volumes and unchanged prices as China’s carbon market sorely lacks momentum

Carbon allowances in China’s national emissions trading market remain unchanged throughout the month of May and volumes have evaporated, as traders begin to expect there will be little regulatory progress this year.

NZ Market: NZUs drift sideways amid lacklustre response to ERP

The New Zealand Unit (NZU) spot price continued to float sideways on Friday, with the market giving the government’s Emission Reduction Plan released earlier in the week a relatively muted greeting, though some say the upcoming June auction could create prices movements off the back of an almost exhausted cost-containment reserve.

Mitsui, Nomura buy Australian-headquartered forestry asset manager

Japan’s Mitsui and Nomura have bought the world’s second largest forestry asset manager and major developer of carbon credits, they announced on Friday.

AMERICAS

LCFS Market: California prices sink towards $100 as bear market continues

California Low Carbon Fuel Standard (LCFS) credit prices slid closer to falling into the double digits this week, marking a new 4.5-year low for the clean fuels programme.

Compliance entities boost CCA position, slash RGGI holdings

Emitters saw their California Carbon Allowance (CCA) holdings increase right before the Q2 WCI auction this week, while they offloaded RGGI Allowances (RGAs), according to US Commodity Futures Trading Commission (CFTC) data published Friday.

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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

In the end – G7 finance chiefs expect to meet the $100 bln/year rich-to-poor climate finance goal by next year, later than the 2020 originally committed to, Reuters reported, citing a draft communique from a meeting in Germany that ends today. It said: “We are strongly committed to achieving the collective climate finance mobilisation goal of $100 bln per year from a wide variety of sources through to 2025 to address the needs of developing countries…We expect this goal will be met in 2023.”

ESG is A-OK – With the US Federal Reserve forced to tackle inflation head on, overall fund performance has sharply dropped year-to-date, and green funds have not escaped the downturn. Since end-December, ESG funds’ NAV performance has fallen by 13%, erasing 14 months of positive performance. According to research by French investment bank Societe Generale, in absolute terms, that is bad indeed, but compared to the overall EPFR funds universe (down by 12%), green funds have been relatively resilient. ESG still ahead in terms of relative performance, as amid the two major market corrections since Jan. 2020, ESG funds have managed to outperform the total fund universe by 3.8%. “This relative resilience is remarkable, given ESG funds’ 1) growth profile, with a heavy investment early on and pay-off in the longer term, and an equity style that has been particularly hard hit by the recent rise in bond yields; 2) their relatively high equity content (63%), which would imply much greater downside exposure; and 3) their relatively low commodity exposure, and notably for funds that invest without carbon (an ESG investment style to which we have dedicated a special product range, alongside our main ESG research strand) at a time when commodities have rallied strongly. SocGen found that ESG funds have done well based on their performance-to-volatility ratios. “These vary a lot by region and by asset class and are largely dependent on the period analysed. ESG funds have typically scored better on these metrics than their All-funds counterparts, even if the comparison is more favourable for ESG equities than for ESG bonds. The analysts said that despite the recent market correction, ESG fund flow momentum remains very healthy.

EMEA

Taxonomy blocking A group of 16 European Parliamentarians have signed a resolution to attempt to block the adoption of the EU’s green taxonomy proposal to label gas and nuclear energy as sustainable investments, Reuters reported. The lawmakers are from groups representing a majority of the Parliament, though the position of all 705 MEPs is unclear, with at least half, or 20 of the 27, member states needed to reject the rules. Two committees will vote on the resolution next month, followed by the full assembly. Read Carbon Pulse’s April 1 article on how the taxonomy plans face rejection by lawmakers as war in Ukraine and the resulting scramble away from Russian fossil fuels has drastically altered the bloc’s energy outlook.

Buildings in Czech – The EU’s building stock is responsible for about 40% of the EU’s total energy consumption and 36% of its greenhouse gas emissions. The revised Energy Performance of Buildings Directive (EPBD) wants to tackle the issue for real. According to Euractiv, with the French Council presidency coming to an end, the Czechs want to make sure the 27 EU member states are on the same page ahead of negotiations with the European Parliament on the Energy Performance of Buildings Directive (EPBD). “We have a tremendous potential to do something great for the European building stock now with the EPBD being on the table,” said Martin Pejrimovsky, energy attaché at the Czech permanent representation to the EU, during a Euractiv event on May 17. On July 1, Czechia will take over from France for a six-month stint at the EU’s helm. And it will be up to Prague to wrangle one of the largest files in the EU’s ‘Fit for 55’ package of climate legislation, which aims to cut the bloc’s emissions by 55% by 2030. Momentum could be in their favour. With war raging in Ukraine, the European Commission recently urged EU member states to raise their ambition on the EPBD as a way to reduce Europe’s reliance on Russian gas, which is widely used in heating.

What’s the (Hinkley) Point? – The new nuclear power station under construction at Hinkley Point in the British region of Somerset will start operating a year later than planned and will cost an extra £3 bln, it has been announced. The French energy company EDF published the findings of a review into the cost and schedule of the power station taking account of the continuing impact of the pandemic. The delay means the first reactor unit is now scheduled to start operating in June 2027, a year later than planned, with costs estimated between £25 bln and £26 bln. EDF said this would not affect the cost to British consumers or taxpayers. Construction began in 2016. (Guardian)

Hit the wall – The Great Green Wall is the UN’s one big idea for combatting desertification: an 8,000 kilometre stretch of vegetation across the Sahel region of Africa. Fifteen years after launch, there is little to show for it on the ground, according to experts speaking at the two-week summit of the UN desertification body in Abidjan, Ivory Coast that ends on Friday. Billed as a solution to the poverty and conflict afflicting the semi-arid region, the programme has been held back by financial barriers, lack of coordination between governments and accelerating climate impacts. (Climate Home)

‘Bone-dry’ solar – As Europe decarbonises its economy and wean itself off Russian oil and gas, one of the world’s sunniest and most arid nations is pitching itself to the continent as an answer to its problems, EurActiv reports. A delegation from sub-Saharan Africa’s driest country has been touring Europe to tout their nation as a potential powerhouse of clean energy. They say Namibia can produce so much solar power it will soon be self-sufficient in electricity – and, by the end of the decade, could become an exporter of green hydrogen. A huge, mainly desert country in southwestern Africa with a population of 2.5 mln, Namibia is sun-drenched and bone-dry. That makes it perfect for erecting gigantic solar farms, whose power can be used to help make hydrogen – which in turn can be used for fuel or converted into ammonia to make fertiliser. Producing hydrogen entails splitting water into its component parts of hydrogen and oxygen, using an energy-gobbling technique called electrolysis. Namibia says it is in a unique position to make the process clean.

Pick your champion – The appointment of Tim Pick as the first UK ‘Offshore Wind Champion’ was confirmed by British PM Boris Johnson and business and Energy Secretary Kwasi Kwarteng on Friday. The Floating Offshore Wind Manufacturing Investment Scheme (FLOWMIS) will provide £160 mln in government funding to boost floating offshore wind capability around the UK at sites in Scotland, Wales and elsewhere by supporting manufacturers and attempting to incentivise private investors to back the sector, expected to rapidly expand in the years ahead. Pick will spearhead the work to accelerate new offshore wind projects around the UK, Kwarteng said.

ASIA PACIFIC

No fossil fool – Japanese Prime Minister Fumio Kishida has laid out a plan to issue an estimated 20 trillion yen ($157 billion) worth of “green transition” bonds to help finance investment to achieve a carbon-neutral society, Reuters reports. The move highlights Tokyo’s efforts to seek alternative sources of energy as Russia’s invasion of Ukraine illustrated the risks the country faces from its heavy reliance on fuel imports. “The energy security environment surrounding Japan has changed dramatically with Russia’s invasion of Ukraine,” Kishida said in a meeting with experts to discuss Japan’s clean energy strategy, calling for the need to shift to a carbon-neutral society from one dependent on fossil fuel. In the meeting, Kishida said Japan would need at least 150 trillion yen in combined private- and public-investment in the next decade to achieve a carbon-neutral society.

Indo ESG – Indonesia’s state-owned enterprises regulator, BPKP, has signed a two-year memorandum of understanding with Climateworks Centre and Australia’s Monash University in Indonesia (MUI), designed to strengthen its supervisory activities relating to sustainable development and climate goals. Climateworks said on Friday that a major component of the project is to build a team of ESG auditors, with the capability to evaluate, supervise and guide the transition towards the green economy. Climateworks will provide project management expertise to support the development of an audit accountability framework and work with several state-owned enterprises, ministries and university to hold conferences and workshop training. Workshops will focus on climate-based finance, low carbon economic development and investment strategies, and green energy transitions in line with Indonesia’s net zero pathway, Climateworks said. MUI president Andrew MacIntyre said the agreement will allow Monash experts to work with one of Indonesia’s most important national agencies.

Fresh Air – Australia’s Victorian government has unveiled its Offshore Wind Directions Paper, designed to ramp up the nation’s nascent industry. The paper includes targets to procure projects that generate at least 2 GW of offshore wind online by 2032, enough to power 1.5 million homes. The state government has touted the winds off the coast of Victoria  as some of the best in the world, with the development of the offshore wind industry seen as a crucial plank of help the state government cut its emissions in half by the end of the decade. It has committed A$40 million ($28 mil) to several offshore wind project to help fund feasibility studies and pre-construction development. Government modelling projects state waters can support some 13 GW of offshore wind by 2050.

Unravel this – Unravel Carbon, a Singapore-based enterprise platform that helps companies track and reduce their carbon emissions, focusing in Asia, and specialising in Scope 3 carbon emissions, has raised a $S10 million ($7.38 mln) seed round, the company stated in a press release. Unravel Carbon’s services include a SaaS decarbonisation platform and access to Unravel’s sustainability experts, it stated. Unravel claims this to have been the largest seed round ever raised by a climate tech platform in Asia. Unravel Carbon cofounder and chief executive Grace Sai said that the company provides an end-to-end climate platform to make it easy and exciting for companies of all sizes to be part of the climate change solution.

AMERICAS

Clean car compadres – California and 19 other US states and the District of Columbia on Thursday backed efforts by US President Joe Biden to restore the most populous state’s ability to set its own strict tailpipe and zero-emission vehicle standards. Last week, a group of 17 states including Ohio and Texas filed a challenge in the US Court of Appeals for the District of Columbia to the EPA’s decision to restore the authority that was withdrawn under former President Donald Trump. Seventeen other states have agreed to adopt California’s tailpipe emissions rules and 15 have backed its zero-emission vehicle requirements. (Reuters)

VOLUNTARY

Done and dusted Crypto firm JustCarbon has closed in online auction of 5 mln of its governance tokens, JCG. The group eventually sold 1 mln of the tokens, which give the holders the right to make proposals and vote on governing issue for the initiative, which sells tokenised carbon removal offsets. After opening on May 17 at $0.7016, the JCG price at the time the auction ended was $0.20. JustCarbon plans to issue 1 bln JCGs over the next decade, most of them to be distributed to people or groups contributing to its efforts. The tokens will be introduced for online trading across 10 crypto exchanges next week, alongside JustCarbon’s removal credits.

All a-Board – AirCarbon Exchange (ACX) has successfully facilitated a trade on its new Carbon Market Board (CMB) platform. A VCS China Renewable project of vintage 2016 was listed on May 17 and attracted a buyer for 25,000 credits, with the transaction settled within three business days. “The trade highlights the ease of use and efficiency of ACX’s CMB platform, which allows project developers and owners of credits to list their carbon credits to ACX’s global network of vetted buyers on the exchange,” ACX said. Sellers have the option to list their credits on CMB but not commit them to the market, giving them the flexibility to market their carbon credits in other ways. ACX is currently waiving fees for new sellers listing credits on the CMB during an initial introductory period, which runs until the end of June 2022. “For project developers seeking to list and sell carbon credits, CMB’s light KYC process ensures the barriers to entry are as low as possible, enabling sellers to match with interested buyers on the exchange in the shortest possible time.”

AND FINALLY…

Stuart Brittle – Central bank policymakers and other global authorities are exaggerating the financial risks of climate change, a senior HSBC banker in charge of sustainable investments said in remarks that drew criticism from climate activists. “Unsubstantiated, shrill, partisan, self-serving, apocalyptic warnings are ALWAYS wrong,” Stuart Kirk, HSBC’s head of responsible investing, wrote on a slide accompanying his presentation at a conference in London on Thursday alongside quotations from bodies such as the UN and Bank of England warning of the risks. Kirk said that such warnings meant his team and HSBC in general are spending a disproportionate amount of time dealing with climate risk, as opposed to other challenges. “We’ve got inflation coming down the pipes and I’m being told to spend time and time again looking at something that’s going to happen in 20 or 30 years, the proportionality is completely out of whack,” he told the conference hosted by the Financial Times, which posted online a video recording of the event. Nicolas Moreau, Chief Executive of HSBC Asset Management, told Reuters via a spokesperson that Kirk’s remarks did not represent the company’s views. HSBC Asset Management oversees some $640 bln in assets, according to the company website.

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