CP Daily: Friday June 24, 2022

Published 04:37 on June 25, 2022  /  Last updated at 04:37 on June 25, 2022  /  Newsletter  /  No Comments

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

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TOP STORY

INTERVIEW: Now that the European Parliament has passed ‘Fit for 55’, what do the analysts think?

The European Parliament this week approved a raft of measures to reform the EU ETS and advance the European Commission’s monumental Fit for 55 climate policy package. Now that the dust has settled somewhat after hundreds of amendments were adopted by the full legislature, and with the file now set to move to trilogue negotiations between the Parliament, Commission, and EU member states, Carbon Pulse had a dozen analysts weigh in on the main aspects of what was agreed by MEPs.

EMEA

European nations win treaty ‘carve out’ to curb protection for fossil fuels

The 54 nations signed up to the Energy Charter Treaty struck a provisional agreement on Friday that would enable European nations to limit protections for fossil fuel projects as they strive to cut emissions, though green groups said the deal was riddled with loopholes.

Euro Markets: EUAs ease 0.8% on weaker energy complex as market awaits clarity on key German, EU legislation

European carbon prices eased slightly on Friday as traders awaited clarity on Germany’s plans to ease its gas supply concerns and member states’ position on ETS reforms ahead of crunch talks due next week.

Denmark imposes domestic carbon levy for ETS-covered firms

Danish EU ETS-covered companies will face a carbon fee of DKK 75/t (around €10) in 2025, rising annually to DKK 375/t (€50/t) by 2030, the government said on Friday.

AMERICAS

ARB board member backs tougher LCFS targets for California at Scoping Plan meeting

A member of California’s Air Resources Board (ARB) spoke up for more stringent targets for the state’s LCFS during the second day of the board’s 2022 Scoping Plan meeting Friday, while others said they were concerned about the plan’s heavily reliance on carbon capture.

CCA emitters favour V23s and V21s, speculators scoop up V22s

Compliance entities continued to raise their California Carbon Allowance (CCA) net length, while speculators reversed course and added length, taking advantage of CCA price weakness amidst declines across financial markets, according to US Commodity Futures Trading Commission (CFTC) data published Friday.

ASIA PACIFIC

CN Markets: CEAs inch up as govt meeting fuels hopes for offset revival, BRI speculation

Allowances in China’s carbon market inched up marginally over the past week, while news of a high-level government meeting on CCER reform sparked hopes that a relaunch of the national offset scheme might draw nearer, with some talking about potential links to Belt and Road initiative countries.

Market watchers “not surprised” if Indonesia pilot ETS, carbon tax launch pushed to 2023

Various government officials are offering different accounts on whether Indonesia’s pilot ETS and carbon tax will be delayed or not, with some market watchers not expecting the scheme to kick off until 2023.

Seychelles launches roadmap to capitalise on blue carbon opportunities

The government of Seychelles has released a roadmap for developing its untapped blue carbon potential which aims to protect its seagrass and mangrove ecosystem assets as a key part of the country’s strategy to address climate change.

INTERNATIONAL

Switzerland agrees bilateral crediting deal with Thailand

Switzerland on Friday approved a bilateral agreement with Thailand, enabling the Southeast Asian nation to sell it carbon credits to help meet its Paris Agreement emissions pledge.

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CONFERENCES

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

Argus Carbon Markets and Regulation Conference – June 30-July 1 in Lisbon, Portugal: The event will deliver critical updates on regulation, the future of the EU ETS, and key developments in the voluntary carbon markets space, amongst other topics that will be tailored for the European and global audience. Featuring panel discussions, fireside chats, presentations, and collaborative problem-solving sessions. Participates will gain knowledge and insight from expert opinions and take advantage of the opportunity to network and discuss with their industry peers in-person for the first time in two years. CP Daily subscribers can get a 15% discount by registering with the code CARBONPULSE15: https://bit.ly/3t4CmH6

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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

Cloudy forecast – Powerful clouds of the super-emitter methane have been spotted by satellite in northwest Algeria, near a conduit that appears to branch off from the Medgaz Gas Pipeline, which supplies about a quarter of the natural gas consumed in Spain. According to Bloomberg, three plumes were observed by a European Space Agency satellite on May 26 and 27. The most severe had an emissions rate of 118 tonnes of methane an hour and was approximately 13 km from what looks like a distribution line connected to the Medgaz Gas Pipeline, according to analysis from geoanalytics company Kayrros SAS and Global Energy Monitor. The plume was about 50 km away from the mainline. Using the emissions rate estimated by Kayrros, if the most severe release lasted an hour, it would have the same short-term climate impact as the annual emissions from more than 2,000 US cars. Although Algeria is a global methane hotspot, historically emissions there have been observed near the Hassi R’Mel gas field in the eastern part of the country. Scientists recently determined equipment associated with the field had been leaking methane for nearly 40 years.

EMEA

See you in October – EU leaders tasked the European Commission with assessing new ways to contain sky-high energy prices, the communiqué of a summit held on June 23-24 showed, with heads of state promising to gather again in October to look into the tabled proposals. “The European Council reiterates its invitation to the Commission to explore with our international partners ways to curb rising energy prices, including the feasibility of introducing temporary import price caps where appropriate,” the text said, making explicit references to the “Russian weaponisation of energy”. At a briefing held Friday at the end of the meeting, Italian PM Mario Draghi – by far the most vocal proponent of a measure to cap gas prices – told reporters that Germany and the Netherlands are progressively lifting their initial opposition. Defending his proposal, the former head of the European Central Bank said that promptly acting on energy prices would have the merit to rein in soaring inflation levels that he says are primarily moving in line with climbing energy costs. However, asked about the feasibility of such a measure on Thursday, the Dutch ambassador showed scepticism toward the idea championed by Draghi, making clear that there’s no majority for it. Draghi told reporters that the topic will be raised at G7 talks on Sunday.

Work to do – The German government will have to significantly tighten measures within its energy and climate reform packages this year to achieve the target of a nearly 100% renewable power system by 2035, think-tank Agora Energiewende found in an analysis containing modelling by consultancies Prognos and Consentec. Even more speed will be needed in the expansion of wind and solar power capacities – both by accelerating planning procedures but also by securing the necessary investment in new renewable installations. Another focus will have to be on the construction of controllable power plants that can be operated with hydrogen, Agora Energiewende said. For a completely renewable power system to work, an expansion of the transmission grid by 40% by 2035 is required, the calculations show. According to the paper, the share of renewable electricity will be at 87% in 2035, with hydrogen plants contributing around 7% and the rest coming from battery storage, pumped hydro and natural gas, and some last conventional power plants (e.g. waste, oil). Germany is aiming for an 80% share of renewables in the power system by 2030 and nearly 100% by 2035. Germany has campaigned for a predominantly decarbonised power sector in its role as G7 presidency, which is expected to lead to a corresponding declaration from the G7 summit starting in Bavaria on Sunday.

Dirtier times – CO2 emissions from fossil fuel combustion in the EU (mainly oil and oil products, natural gas, coal and peat) increased by 6.3% in 2021 compared with the previous year, according to Eurostat, as GHG output rebounded from demand destruction triggered by the pandemic. According to Eurostat estimates, CO2 emissions grew in 2021 in almost all EU member states, with the largest increases in Bulgaria (+18%), followed by Estonia (+13.1%), Slovakia (+11.4%) and Italy (+10.6%). The only two countries with an estimated decrease in CO2 emissions were Portugal (-5.5%) and Finland (-1.5%). The increase in CO2 emissions was mainly due to the rising use of solid fossil fuels (which contributed to over 50% of the increase). Liquid fossil fuels were responsible for over 29% of the increase, whereas 21% can be attributed to natural gas. The reduced use of peat slightly alleviated the increase in CO2 emissions.

ASIA PACIFIC

Sun Cable cleared — Australian government authority Infrastructure Australia has given Sun Cable’s Australia-Asia PowerLink solar export project Stage 3 investment ready status, after meeting all the requirements of its Infrastructure Priority List. The project, backed by Australian billionaires Mike Cannon Brookes and Andrew Forrest, will see 17-20GW of solar electricity generated in the Northern Territory, firmed by a 36-42GWh battery, and exported via undersea cable to Indonesia and Singapore. The new status means the authority has affirmed the project’s economic benefits, providing A$8 bln in investment in Australia and A$2 bln/year in export revenue – the equivalent to the country’s dairy industry. The A$30 bln project is expected to abate 2.6MtCO2e over its life, as well as offering some 14,000d direct and indirect jobs. The project is expected to reach financial close at the start of 2024 and be fully operational by 2029.

Import the power – Singapore started importing renewable energy from Laos through Thailand and Malaysia on Thursday, after an initial two-year power purchase agreement was signed between Keppel Electric and Laos’ state-owned Electricite du Laos (EDL), Channel News Asia reports. The Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP) will import up to 100 megawatts (MW) of renewable hydropower using existing interconnections, marking the first multilateral cross-border electricity trade involving four ASEAN countries.

AMERICAS

Estimating pipelife – Conflicting reports from Canada’s Parliamentary Budget Office (PBO) and ones from Canadian banks TD and BMO have made very different assumptions for the years of operation of the federal government’s Trans Mountain pipeline (TMX), Canada’s National Observer reports. PBO uses a 40-year time horizon while TD and BMO have modelled TMX for a 100-year lifespan. The extended 100-year horizon allows the government’s C$21.bln (US16.6 bln) investment, which is 174% over budget to attain profitability, vs. the PBO’s 40-year estimate. PBO has questioned the banks’ assumptions given Canada’s net-zero 2050 target that would require no new oilsands project approvals after 2050 or 2060, which would likely write-off an estimated C$14.4 bln (US$11.4 bln) worth of the project’s assets. The federal government purchased TMX for C$7.8 bln (US$6.04 bln) in 2018.

Solar break – Rhode Island will give commercial scale solar farms a tax break largely opposed by its municipalities. Proponents of property taxes for renewable energy firms say developers are already getting charged $5,000/MW while opponents argue forests are being cleared for the projects with little local input. The bill harmonizing a lower tax burden on solar energy plants in the state passed in Rhode Island’s general assembly on Friday in 28 – 10 vote, after initially failing. (The Providence Journal)

We’d like a raise – Exxon Mobil CEO Darren Woods would like the US government to help incentivise some of the clean energy innovations his company is developing, like biofuels and direct air capture of carbon dioxide. In an interview with CNBC, the leader of one of the largest oil and gas companies in the world said direct air capture is in his mind “the holy grail.” The company estimates the market to capture and store CO2 will be worth $4 trillion by 2050. There is a current price on CO2 sequestration in the US listed in the IRS tax code and known as the 45Q tax credit, but it tops out at $50 per tonne captured and stored. Exxon Mobil would prefer a price of at least $100. Woods recognised a higher carbon price could be a difficult political accomplishment and suggested policies focused on specific market sectors could be a good start.

SCIENCE & TECH

Mish-marshes – A Duke University study reverses thinking on the ability of expanding coastal marshes to capture high amounts of carbon. The study instead found that coastal marshes tend to invade freshwater wetlands and low-lying forests that serve as carbon sinks. The resultant tree deaths decrease carbon storage and release more carbon via decomposition than previously modelled. In 16 of the 19 runs of the model forecasting land changes to 2104, inland marsh migration transformed the land from a net carbon sink to a net carbon source. The study was financially supported by the United States Climate Alliance through a grant administered by American Forests and the Southeast Climate Adaptation Science Center. (AzoCleantech)

AND FINALLY…

Coming down the pipe – The German government is considering converting parts of the unused Nord Stream 2 gas pipeline into a connection for a LNG terminal on the Baltic Sea coast. Der Spiegel reported on Friday that the German economy ministry is considering expropriating the part of the pipeline system located on German territory and cutting it off from the rest of the pipeline. Russia said it would be a matter for lawyers if Germany took such steps. Russian gas giant Gazprom completed Nord Stream 2, which was designed to double the flow of Russian gas direct to Germany, at the end of last year but it has yet to be used. German Chancellor Olaf Scholz announced it would not go into operation after relations with Moscow broke down amid Russia’s invasion of Ukraine. Flows of natural gas from Russia have been declining for weeks, and Germany, mindful of the risk of economically damaging energy shortages, is looking for emergency landing locations for LNG. Berlin this week warned that Russia’s moves to slash Europe’s natural gas supplies risked sparking a collapse in energy markets, drawing a parallel to the role of Lehman Brothers in triggering the financial crisis. With energy suppliers piling up losses by being forced to cover volumes at high prices, there’s a danger of a spillover effect for local utilities and their customers, including consumers and businesses, Economy Minister Robert Habeck said Thursday after raising the country’s gas risk level to the second-highest “alarm” phase.

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