CP Daily: Friday May 27, 2022

Published 02:23 on May 28, 2022  /  Last updated at 02:26 on May 28, 2022  /  Newsletter  /  No Comments

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

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TOP STORY

ANALYSIS: ‘Carbon neutral’ fuel trades go underground as oil majors fear criticism

Oil and gas players are continuing to make ‘carbon neutral’ fuel deals despite a major drop off in announcements, observers told Carbon Pulse, with the firms believed to be making secretive trades involving millions of carbon credits to offset fossil fuel shipments even as they struggle to agree on how to report them.

INTERNATIONAL

G7 energy ministers fail to set coal exit deadline, scale back carbon price ambitions

G7 energy ministers pledged on Friday to ditch coal-fired production but failed to set the 2030 deadline that officials from hosts Germany had crafted in a draft text.

AMERICAS

California draft Scoping Plan contradictory in role of cap-and-trade programme, watchdog says

An independent watchdog committee along with environment justice group representatives found inconsistencies in California’s 2022 draft Scoping Plan on the role of cap-and-trade in achieving the state’s emissions targets, but differed in their approaches to reforming the programme, a virtual meeting heard Friday.

California bill to adopt public cap-and-trade banking metrics fails, reforms planned for linkage proposal

California legislators on Thursday turned down a bill that would have added public banking metrics for compliance instruments in the WCI-linked carbon market, while lawmakers plan to further amend an act that would put offset usage underneath the state’s allowance budget in the event of future linkages.

Brazil development bank agrees $1.8 mln in carbon credits buys under pilot tender

The Brazilian Development Bank (BNDES) has agreed to buy BRL 8.7 million ($1.8 mln) in voluntary carbon credits under its pilot tender process.

WCI emitters, speculators build allowance length ahead of Q2 auction results 

Compliance entities saw their California Carbon Allowance (CCA) net length hit a 13-month-high prior to the publication of Q2 WCI auction results this week, while speculators added to their holdings for the first time in four weeks, according to US Commodity Futures Trading Commission (CFTC) data published Friday.

ASIA PACIFIC

Exchange to impose temporary price controls on China’s green power trading market

The Beijing Power Exchange will impose initial price control measures in the emerging green power trading market to avoid price spikes, it said when laying out rules for the new scheme, a move tipped to lure away at least some participants from China’s carbon offset market.

CN Markets: China CO2 price stable, but economic woes sour outlook

Allowance prices in China’s carbon market inched up over the past week, but market sentiment is turning bearish as participants expect mounting economic worries to hold back market development.

Australian offset buyers pay up to avoid most criticised credit types

Australian Carbon Credit Units (ACCUs) from controversial human-induced regeneration (HIR) projects are steadily trading at a premium in the market, though that is primarily because buyers perceive some other project types to be worse more than HIR being better, according to analysts.

Malaysia’s Sarawak to develop statewide climate policy in follow-up to passage of forest carbon law

The state government in Malaysia’s Sarawak will prepare a climate change policy document in a follow up to last week’s passing in the legislative assembly of a law that laid out a framework for setting up a statewide forestry-based carbon market.

VOLUNTARY

INTERVIEW: AirCarbon Exchange spies an opportunity after CBL rolled N-GEO vintage contracts

Division lines have been drawn in the battle to win market share in the voluntary carbon market (VCM) after AirCarbon Exchange (ACX) said Friday that it’s not going to follow the route followed by rival Xpansiv’s CBL and introduce a rolling contract for its nature-based standardised spot contract.

Oil and gas could be barred from credible climate claims guidelines

Many of the world’s largest oil and gas companies have committed to mid-century net zero emissions targets, but initiatives looking into the credibility of climate claims are abstaining their support over fears of backing greenwashing.

Offset investor closes $79 mln offtake deal between US bank, Vietnamese developer

An offset investor has facilitated a $79 million offtake deal between a Vietnamese project developer and a US investment bank.

EMEA

Shell takes swipe at UK for sweetening oil and gas spending over renewables

Shell has taken a swipe at the UK government’s tax breaks for North Sea fossil fuel investment that accompanied Thursday’s news of a windfall levy on oil and gas profits by pointing out that the sweeteners do not extend to renewable energy.

Euro Markets: EUAs ease to thinly-traded marginal loss despite auction gaps

EUAs traded broadly sideways for most of Friday as traders initially consolidated the previous session’s  gains on continued thin volume due to public holidays across Europe, before a late dip prior to the close saw the Dec-22 ease to a 56-cent daily loss.

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CONFERENCES

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

Climeworks’ DAC Summit – June 30 in Zurich/online: Carbon removal and Direct Air Capture technologies have been experiencing a watershed moment in recent months.   Scientists have deemed them indispensable in the latest IPCC report, governments have stepped up their funding and policy efforts, and investors have committed large amounts to scale up. Where does the industry stand today, and what are its recent most promising developments? What are the requirements and immediate next steps for scaling up at the required speed? And when the industry works together, what could the future look like? The Summit provides a unique opportunity to get answers to these questions from DAC insiders and experts. Register here

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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

Collateral damage – Individuals in rich countries face huge financial losses if climate action slashes the value of fossil fuel assets, a study shows, despite many oil and gas fields being in other countries. The researchers estimated that existing oil and gas projects worth $1.4 trillion would lose their value if the world moved decisively to cut carbon emissions and limit global heating to 2C. By tracking many thousands of projects through 1.8 mln companies to their ultimate owners, the team found most of the losses would be borne by individual people through their pensions, investment funds, and share holdings. The analysis also found that financial institutions have $681 bln of these potentially worthless assets on their balance sheets, more than the estimated $250-500 bln of mispriced subprime housing assets that triggered the 2007-08 financial crisis. The researchers did not predict if or when these fossil fuel “stranded assets” would cause a financial crash, but said the size of the number was worrying. The US and UK are by far the countries with the biggest potential stranded assets in their financial sectors. In contrast, 80% of those assets in China are owned by the government. (Guardian)

AMERICAS

Mandatory climate risk disclosure – Canada’s Office of the Superintendent of Financial Institutions (OSFI) published draft guidelines Thursday on climate-risk management and mandatory climate-related financial disclosure for federally regulated financial institutions, such as banks and life insurance companies. Risk management will include a requirement for better climate risk identification, monitoring, and operational preparedness. Mandatory disclosures, to start in 2024, will help build trust and incentivise improvements in the quality of the institutions’ governance and risk management practices related to climate, the draft said. The public comment period runs to Aug. 19. with a final version of the rules expected by early 2023.

Here we go again – Key Senate Democrats are working to revive US President Joe Biden’s legislative agenda with a current focus on energy, environment, climate, and tax reform rather than the social safety net, three people familiar with the matter told Reuters. Plans to revive the “Build Back Better” legislation now revolve around talks between Senate Majority Leader Chuck Schumer and the key Democratic swing vote in the chamber, Senator Joe Manchin of West Virginia, the people said. Manchin, who stymied earlier attempts to pass the bill over concerns about the deficit and inflation, has signalled he could support some climate provisions in a trimmed down version of the bill, including a fee on methane emissions and a carbon border adjustment mechanism (CBAM), according to two of the people. The lawmakers hope to resolve the talks on the legislation by the end of June before shifting focus to campaigning ahead of the November midterm elections for control of Congress. Manchin’s spokesperson did not confirm the reporting but said the senator “remains seriously concerned about the financial status of our country and believes fighting inflation by restoring fairness to our tax system and paying down our national debt must be our first priority.” Manchin has said publicly that the only deadline to pass a spending bill is Sept. 30.

Kickin’ the CANZ – California and New Zealand on Friday signed a Memorandum of Cooperation to tackle the climate crisis, reduce pollution, and bolster the clean economy, while emphasising community resilience and partnership with indigenous leaders. Leaders from the two jurisdictions outlined common objectives to achieve carbon neutrality by mid-century, as well as their shared world-leading policies for zero emissions transportation, climate innovation, clean power generation, nature-based solutions, and zero-waste initiatives. The MOC furthers these common objectives through sharing information and best practices, and also mentions undefined cooperation on carbon markets.

Bit the dust – A carbon-neutral ETF bitcoin spot exchange was denied a listing by the US SEC Friday. The federal regulatory body said a lack of adequate fraud prevention measures were to blame. One River Carbon Neutral Bitcoin Trust, owned by bourse ICE, was proposed by NYSE Arca, but failed to protect the public interest, according to the SEC. A surveillance sharing agreement would be required to list the ETF.

EMEA

Sticking plaster – The UK’s windfall tax on oil and gas companies is only a “sticking plaster” (also known as a band-aid to non-Brits) to provide temporary relief on energy bills that does nothing to improve the UK’s leaky homes, and it encourages more fossil fuel production, climate campaigners have said. They say this will increase the UK’s dependence on fossil fuels instead of supporting a switch to green energy. Experts have called for a nationwide programme of home insulation, as a quick and sure way to bring down energy bills that had been neglected by the government, and warned of the impact of using tax breaks to fuel new oil and gas exploration that would do nothing to ease bills in the short term and would lock in high greenhouse gas emissions in the long term. (Guardian)

Gas for neighbours – The gas connection between Bulgaria and Greece will start operating on July 1, with Bulgaria poised to receive 1 bcm of gas from Azerbaijan – enough to meet the country’s needs during summer, with prices expected to be lower than Russian gas. The launch of the interconnector became possible after the Bulgarian and Greek energy regulators took a joint decision to licence the gas connection operator – ICGB. The decision was fast-tracked due to the war in Ukraine, which has led to the suspension of Gazprom’s gas supplies to Bulgaria. Authorities in Sofia have rejected Russian demands to change contracts and pay for natural gas in rubles. The gas connection with Greece will be of key importance for the security of gas supplies and the formation of favourable prices for consumers in Bulgaria, the Bulgarian energy regulator commented. Azeri gas is delivered through the Trans-Adriatic Pipeline (TANAP), which passes through Turkey and Greece and reaches Italy. The gas interconnector allows the transfer of 3 bcm of natural gas with the possibility of increasing to 5 bcm when installing more powerful compressor stations, half of the capacity of the gas connection is reserved by Bulgargaz, and the remaining capacity will be traded on the open market. (EurActiv)

ASIA PACIFIC

Wait for it – The union government plans to launch a comprehensive green hydrogen mission in two months to take forward the green hydrogen policy announced in February, Livemint reports. The mission is expected to announce a green hydrogen purchase obligation in fertilizer production and petroleum refining, akin to renewable purchase obligations (RPO). Noting that the national green hydrogen policy outlined the “preparatory measures”, an official said: “What we will have is a full-fledged national green hydrogen mission; hopefully in two months.” The mission is also expected to list the sectors that will have to start using green hydrogen on a voluntary basis and a roadmap for sectors such as fertilizer and petrochemicals to use the green fuel mandatorily.

Hydrogen goes global – A global alliance grouping hydrogen-related organisations from 18 nations has been launched under the chairmanship of South Korea’s private-government body, Hydrogen Convergence Alliance (H2KOREA), to strengthen international cooperation for the early establishment of a hydrogen ecosystem, Ajudaily reports. Hydrogen association representatives from 18 countries participated online and offline in an event in Seoul on May 25 to form the Global Hydrogen Industrial Association Alliance (GHIAA). South Korea was appointed as the first chair country. A secretariat was established at H2KOREA, which serves as a control tower to promote South Korea’s hydrogen economy.

We’re in – The First Movers Coalition (FMC) has expanded with the membership of Singapore, which opted to join in line with its efforts to decarbonise emissions-intensive sectors, Singapore Business Review reports. Aside from Singapore, new members of FMC include Denmark, India, Italy, Japan, Norway, Sweden, the UK, and the US. “Climate change is an existential threat, especially to a small island state like Singapore. As a global business and financial hub, Singapore is well-placed to contribute to the FMC in developing and scaling up innovative low-carbon technologies in hard-to-abate sectors,” Minister for Transport and Minister-in-charge of Trade Relations S Iswaran said during the World Economic Forum Annual Meeting at Davos.

AND FINALLY…

Andes anxiety – In a global first for climate breakdown litigation, judges from Germany have visited Peru to determine the level of damage caused by utility RWE – historically the biggest emitter in the EU ETS – in a case that could set a precedent for legal claims over human-caused global heating. In 2017, judges in Hamm, Germany, made legal history by accepting a case brought by farmer and mountain guide Saul Luciano Lliuya against RWE, asking for €17,000 for the costs of preventing damage from a potentially devastating outburst flood from the lake. This week, the judges visited the lake to determine whether the firm is partially liable for the rise in GHG emissions that could trigger flooding. RWE is being sued for having contributed to 0.47% of historical global emissions. Oil firms like BP and Shell with much bigger carbon footprints could also face similar cases in the future. (The Guardian)

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