CP Daily: Monday October 3, 2022

Published 00:35 on October 4, 2022  /  Last updated at 00:43 on October 4, 2022  /  Newsletters  /  No Comments

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

One week until Carbon Forward 2022 – Europe’s leading environmental markets conference. Taking place in London and online from Oct. 12-14, don’t miss the chance to hear about the risks and opportunities presented by the world’s largest carbon markets – compliance and voluntary. Or come network with your industry peers and meet our sponsors and exhibitors.

In-person passes are limited and going fast, so Register Now!

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TOP STORIES

EU lawmakers back REPowerEU compromise in interim vote

Key European lawmakers in an interim vote late on Monday stuck to a compromise that would part-finance the REPowerEU strategy with €20 billion worth of carbon allowance sales solely sourced from frontloaded member state auctions over three years.

ENVI proposal seen as “least bearish” of REPowerEU funding solutions -analysts

The European Parliament’s environment committee (ENVI) compromise on funding for the REPowerEU initiative is  the “least bearish” of the options being discussed by co-legislators, according to analysts assessing the impacts on the EU ETS.

AMERICAS

Quebec carbon market emissions in 2021 surpass cap for fourth straight year

Quebec GHG output in 2021 partially rebounded from earlier stages of the COVID-19 pandemic to overshoot the limits of the state’s WCI-linked cap-and-trade programme once again, according to provincial data published Monday.

LCFS Market: Credit supply continues to flood market, weigh on California prices

California Low Carbon Fuel Standard (LCFS) credit prices continued to slide on Monday, dropping 14% over the week, as market participants considered action from regulator ARB that is necessary for an improvement in supply-demand fundamentals.

ASIA PACIFIC

Malaysia’s untapped carbon market potential can scale with policy, regulatory support -report

Malaysia has significant potential to utilise carbon markets to help meet the Southeast Asian economy’s climate targets, but this will require harmonising the design of voluntary and compliance markets, definitions of clear rules and guidelines for project development, and a scale-up of financing, a report has found.

South Korea to seek CBAM acceptance for ETS carbon reductions, strengthen MRV

South Korea will open negotiations with the EU that carbon cuts achieved under its emissions trading scheme will be recognised under the Carbon Border Adjustment Mechanism (CBAM), while also rolling out plans to improve its domestic MRV system to align with international standards.

Australia Market Roundup: Research warns finance sector exposed to ACCU risk, as offset issuances are up

An investment firm has highlighted the risks posed to the finance sector if its customers rely too heavily on carbon offsets to meet their climate goals, citing longstanding integrity concerns, while issuance of Australian Carbon Credit Units (ACCUs) rise.

VOLUNTARY

VCM Report: Deepening economic gloom weighs on prices

Standard nature-based spot and nearby futures continued to slip lower over the past week, battered by the deepening economic gloom and headlines warning of sharply higher interest rates, although fresher vintages held steadier as large volume sellers shied away from the market.

Divergence on role, governance of IC-VCM continues in stakeholder debate

The Integrity Council for the Voluntary Carbon Market (IC-VCM) completed its 60-day public consultation last week on setting the bar for VER quality, receiving public submissions including a scathing submission from the largest carbon offset programme administrator Verra.

VCM a useful strategy tool for companies ahead of compliance, says US official

The voluntary carbon market’s chances of success are slim but it is useful for early mover companies to get ready for the advent of compliance markets, a US government official told a carbon conference on Monday.

EMEA

Euro Markets: EUAs consolidate after testing support as market awaits ENVI REPowerEU decision

EUA prices tested recent support levels before consolidating on Monday as the market eyed the evening’s meeting of the European Parliament’s environment committee (ENVI) at which lawmakers were expected to adopt a position on funding measures for the REPowerEU initiative.

INTERNATIONAL

Report casts doubt on World Bank’s $17 billion of climate finance

The World Bank $17.2 billion climate finance public sector portfolio could be off by as much as $7 bln or 40%, according to a report published by an NGO on Monday as COP27 hosts Egypt urged rich nations to make good on their climate aid commitments at next month’s UN summit.

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CONFERENCE

One week until Carbon Forward 2022 – Europe’s leading environmental markets conference. Taking place in London and online from Oct. 12-14, don’t miss the chance to hear about the risks and opportunities presented by the world’s largest carbon markets – compliance and voluntary. Or come network with your industry peers and meet our sponsors and exhibitors. In-person passes are limited and going fast, so Register Now!

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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

Pre-COP chop – Some 50 state representatives are meeting in Kinshasa from Monday for a two-day round of meetings ahead of November’s COP27, with the energy crisis and geopolitical tensions already proving a major challenge for the future of multilateralism. “We don’t have time for a war,” said Remy Rioux, head of the French Development Agency (AFD), in an opening Pre-COP press conference. COP26 failed to reach a deal on the phasing out of coal – only incentives to gradually reduce its use. Since then, Russia’s war in Ukraine has pushed countries to seek non-Russian energy sources, forcing some to fall back on the carbon-intensive fuel. As a result, the IEA said global coal demand is set to return to an all-time high in 2022. According to Rioux, it is thus in a “moment of deep and multiple crises” that COP27 will open next month in Sharm el-Sheikh, Egypt. The war in Ukraine has led to increased tensions between the world’s major regional blocs. As China continues to quietly back Russia while the US leads NATO’s action, others are leading bilateral expeditions to strike energy deals. Bilateralism is thus gaining ground, as illustrated by the recent successive visits by European leaders to various fossil fuel-producing countries. Despite the Egyptian presidency’s comment that the task of COP27 is to “implement” the commitments made at COP26, the current turbulent waters may hinder that task. There are also fears African governments will use the threat of exploiting fossil fuel reserves to push European nations to keep their promises on climate change, investments, and infrastructure. (EurActiv)

Take the LPolitico reports on a draft negotiating plan suggesting that the EU “won’t back developing country demands for a new fund [for loss and damage] to be created at the COP27”. The document, which may change before being finalised by finance ministers on Oct. 4, underscored the need for more action to be taken by the EU in response to the snowballing damages from climate change in poorer countries. But it made no mention of meeting vulnerable country demands for the upcoming summit to include discussions on the new fund. The draft instead backs a more general discussion, launched at COP26, on ‘funding of activities to avert, minimise and address loss and damage are discussed’. (Carbon Brief)

AMERICAS

Bolsonaro breathes – Left-wing candidate Luiz Inacio Lula da Silva came out on top in the first round of Brazil’s national election with 48% of the vote, but right-wing incumbent Jair Bolsonaro outperformed expectations, clinching 43%. The final decision on who becomes the country’s next president will come in the second round of voting on Oct. 30. Minor candidates for president were eliminated following this round, and the two candidates left in the race will have to court those supporters, who make up just 9% of the electorate. The outcome of the election could have major implications for the future of carbon markets in the country. (Climate Home)

Gas Glenn – Gov. Glenn Youngkin (R) on Monday repudiated Virginia’s plan for becoming carbon-free by 2050 as his administration issued a report calling for continued reliance on natural gas and a “moon shot” effort to ramp up nuclear energy. An update of the state’s energy plan was required under the Virginia Clean Economy Act passed in 2020 by a Democratic-controlled General Assembly and signed into law by then-Gov. Ralph Northam (D). As envisioned at the time, the update would describe how the state would continue to take steps to shed its reliance on fossil fuels. But Youngkin used the update to argue that the legislation puts Virginia at a competitive disadvantage with other states, and said a mandated transition would drive up the cost of power for consumers. So his report instead outlines proposals to hold down energy costs and slow the switch to renewables such as wind and solar. That involves an “all of the above approach,” Youngkin said – continuing to rely on natural gas as alternative sources mature and building “the world’s leading nuclear energy hub right here in Virginia.” As a centrepiece, he called for a “moon shot” effort to develop a commercial small modular reactor in Southwest Virginia in the next 10 years. Youngkin is already attempting to withdraw Virginia from the Northeast US RGGI cap-and-trade system in Dec. 2023. (Washington Post)

Weighing in on wetlands – The US Supreme Court heard arguments Monday about the scope of federal protection for wetlands and streams – a case with climate change and fossil fuel development implications. Sackett v. EPA covers a question that has long vexed SCOTUS and other courts: the Clean Water Act’s (CWA) reach and limits. It stems from an Idaho couple’s contention that they didn’t need federal permits to fill in wetlands for building a home near a large lake. The outcome may scale back EPA authority, and the case is important to both environmental and industry groups lining up on opposing sides. Oil pipeline, mining and homebuilding groups prefer the conservative plurality’s opinion in a splintered 2006 decision, when it said a “continuous surface connection” to waters clearly covered by the CWA is needed to trigger regulation. Environmentalists fear the current 6-3 conservative majority is readying to severely curtail EPA’s oversight of smaller waterbodies – even though they feed into bigger systems and affect their health. Meanwhile, Politico noted “The court could restrict EPA’s ability to protect wetlands, which act as carbon sinks.” (Axios)

Clean Con – Germany’s largest power producer RWE has agreed to buy Con Edison’s Clean Energy Businesses for $6.8 bln, nearly doubling RWE’s renewables portfolio in the US, the world’s second-biggest renewables market. The purchase will be partly funded by RWE issuing a $2.43 bln convertible bond to a Qatar Investment Authority unit, through which the QIA will become a 9.1% shareholder in RWE. Con Edison said it was scrapping plans to issue up to $850 mln in new shares this year and withdrawing equity guidance for the next two years. It said the deal would allow it to focus on its core utility business and New York’s clean energy shift. The transaction will nearly double RWE’s US renewables portfolio to more than 7 GW and grow its regional project pipeline by 7 GW to more than 24 GW. (Reuters)

EMEA

War impact – The seven-month-old war in Ukraine alone has caused 31 million tons of CO2 emissions in the country, roughly the amount produced by New Zealand annually, Reuters reported, citing a presentation by the nation’s environment minister Ruslan Strilets to the European Parliament on Monday. He said another 79 million tonnes of GHG emissions could be produced for the reconstruction of infrastructure and buildings destroyed during the war. This compares to Ukraine’s pre-war total GHG emissions of around 300 Mt a year. Strilets said that environmental damage in Ukraine caused by Russia’s invasion was estimated at around $35.3 bln, with one fifth of protected areas at risk of destruction and about 2,000 cases of environmental damages already recorded.

Red alert – European natural gas demand will slump next year as high prices drive nations to enact energy-saving measures amid Russian supply curtailments, according to the IEA. High gas prices will result in European consumption falling by 4% in 2023 after slumping by a record 10% this year, the agency said in a quarterly gas report. Declines are most pronounced in the industrial sector, but are also evident in power generation, pushing global gas demand down by 0.8% this year. The EU is taking measures to tackle the worst energy crisis in decades, escalated by severely reduced flows from Moscow, once the biggest gas supplier to the region. The EU has urged for a voluntary reduction in gas demand by 15% compared to its five-year average. If demand is not curbed, the region’s storage sites will dip to a critically low level of 5% in February if Russian pipeline flows completely stop from Nov. 1, the IEA estimates. Such low inventories could create disruptions if there is a late winter cold snap. (Bloomberg)

Load shedding – The UK faces a significant risk of gas shortages this winter and could enter an emergency that would see power stations switched off, according to regulator Ofgem, Bloomberg reports. A second stage of a network gas supply emergency would enforce load shedding on the largest users such as gas-fired stations, Ofgem’s head of wholesale market management, Grendon Thompson, said in a letter accepting a request by generator SSE that the regulator should urgently address the risk of possible insolvencies. Russia has squeezed gas flows to Europe in retaliation for sanctions imposed by the West following Moscow’s invasion of Ukraine. That’s curbed global gas supply and increased competition for the fuel, raising the prospect of blackouts this winter as about 40% of the UK’s electricity comes from burning gas.

Fast lane – New North Sea gasfields will be prioritised during a licensing round that the UK regulator is expected to announce later this week, aimed at boosting domestic production in the short term as the government attempts to tackle the energy crisis, the Financial Times reports. Andy Samuel, the outgoing chief executive of the North Sea Transition Authority (NSTA), told the Financial Times that he would fast-track applications for discoveries in the southern North Sea, as part of a process that would grant more than 100 permits largely focused on exploration. The government has promised to increase North Sea production as it seeks to secure more UK energy supplies in response to Russia’s squeeze on natural gas exports to Europe, with Moscow putting pressure on western nations over their military support for Ukraine.

Drax attack – UK power company Drax is cutting down environmentally-important forests in Canada, according to a BBC investigation to be broadcast on its flagship Panorama programme. Drax runs the UK’s largest power station, a biomass plant based in North Yorkshire which produces energy from the burning of wood pellets that has benefitted substantially from government renewable energy subsidies and a zero-rating of its biomass-related emissions in the UK ETS. Analysing satellite images, traced logging licences and used drone filming, the BBC said it has discovered some of the wood comes from primary forests in Canada. Drax has insisted it only uses residue and waste material. (BBC)

NCYNK – Africa’s first verifiable emissions reduction platform, which uses a public decentralised ledger to track emission reductions, will start trading its first tokens this quarter, Bloomberg reports. The platform, known as CYNK, will use the Hedera Hashgraph ledger, and trade tokens generated by Tamuwa, Kenya’s largest biomass company. It is also in talks to trade emissions reductions credits from a company that plans to practice regenerative agriculture on 50,000 hectares of land in the East African country and a blue carbon project. Regenerative agriculture refers to farming practices that help store carbon while blue carbon is stored by ocean and coastal systems that would otherwise be released into the atmosphere. Tamuwa, which founded CYNK, produces biomass briquettes from waste known as bagasse that comes from sugar milling operations in Kenya. Bagasse emits methane if left to rot. Its emissions credits will initially be tradable on CYNK but it also plans to have them attain Gold Standard certification next year.

ASIA PACIFIC

Domino theory – Australia’s electricity market is about to be transformed to a lower carbon one due to successive decisions by state governments and the private sector, according to Renew Economy. Last week was one of the most stunning weeks on Australia’s rapidly accelerating green energy transition – a pledge by the country’s most coal dependent state to close all its coal generators by 2035, quickly followed by another pledge by the country’s biggest polluter to do exactly the same thing. The new timelines outlined by the Australian state of Queensland and utility AGL Energy should not be surprising, however, as they are more or less in line with the most likely scenario laid out by the Australian Energy Market Operator, and the assumptions behind the new federal Labor government’s 2030 emissions reduction target. But it is one thing for scenarios to be made and another for plans to be enacted. This is what is the game-changing situation in Australia – freed of the yoke of Coalition energy dogma and policy bollards – state governments and private companies and investors are now getting on with the job, according to the article.

Diversify your supply – Japanese companies are looking to invest in the Canadian province of Alberta to produce ammonia and methanol in the effort to build global supply chains of greener energy to fight climate change, a provincial minister said, Reuters reports. Home to Canada’s oil sands, Alberta aims to become a hub for hydrogen production as well as carbon storage, as the world tries to cut climate-warming carbon emissions. As part of such efforts, Japan wants to step up investment in liquefied natural gas (LNG) and low-carbon fuels such as hydrogen and ammonia to ensure stable supply and reach a goal of carbon neutrality by 2050. “We are having LNG conversations with Japanese companies as well, but most of their interests are around new projects for hydrogen, meaning ammonia or methanol,” said Dale Nally, Alberta’s associate minister of natural gas and electricity. “Japan wants diversified clean energy portfolio and they also want a diversity of jurisdictions that they get that energy from,” he told Reuters on Friday.

Hydrogen deal – Japanese Industrial conglomerate Sojitz, European bulk liquid storage company, Rubis Terminal Infra SAS, and Spanish infrastructure investment company, Reganosa Asset Investments, have signed a Memorandum of Understanding to conduct a joint feasibility study for the development of a green hydrogen supply chain in Europe, according to a Sojitz press release. Reganosa is developing the H2Pole project, the first-ever regional hydrogen-project labelled as a “Strategic Industrial Project”, and will consist of a green-hydrogen production facility located in Galicia, northwest of Spain. Its initial phase, to be operational from 2025, the project will target regional customers. In the second stage, the H2Pole project is expected to expand its production to export green hydrogen to northwest Europe, where import demand is expected to surge in the coming years.

VOLUNTARY

BAM! – European construction company Royal BAM Group’s UK and Ireland businesses has set a target to achieve net zero carbon emissions in their direct operations by 2026. The company said this went beyond the parent firm’s target to reduce its direct emissions by 80% by 2026 from 2015 levels. BAM said it would not rely heavily on carbon offsets, which it “believes can disguise more substantial progress in how a company is acting”. It also claimed it would become the only company in the industry so far not to count its purchase of renewable electricity towards zero emissions, and that it wanted to reduce its real emissions from grid electricity usage. Under its plans, the contractor will try to meet net zero for scope 3, as well as 1 and 2. Measures taken by BAM to reduce emissions have included swapping fossil fuels for hydrogenated vegetable oil, using lower carbon concrete, and creating net zero projects. Any remaining emissions from 2026 onwards will be offset using methods such as reforestation or carbon capture. (Construction News)

Trees by Amazon – Amazon has committed the first funding for UK-based projects through its ‘Right Now Climate Fund’, outlining plans to rewild parts of London and improve nature access across the UK. The e-commerce giant first launched the €100 mln fund in 2019 with the intention of supporting “immediate actions” that have co-benefits for climate and nature. These actions include the conservation, restoration, and creation of forests, green spaces, wetlands and peatlands. Subsequently, in the latter half of 2021, Amazon confirmed that one-fifth of the fund would be allocated in Europe. on Monday, it confirmed plans for the first UK-based projects it will support through the Fund, with a total of £2.85 mln of backing. In Greater London, Amazon will provide £750,000 to the London Wildlife Trust’s ‘Rewild London’ fund. Rewilding involves reinstating natural processes to landscapes and habitats that have deteriorated, providing a home for flora and fauna. The funding will support 20 rewilding projects in collaboration with owners and managers of nature sites. Amazon has additionally committed £2.1m to the Woodland Trust’s ‘Emergency Tree Fund’, which was created to award grants to local authorities whose residents do not have sufficient access to nature. The grants in question should collectively enable the planting of 450,000 trees and the creation of 11 new, permanent jobs. (edie)

SCIENCE & TECH

A trillion-dollar opportunity – A new analysis prepared by Boston Consulting Group (BCG) and commissioned by Third Way and Breakthrough Energy looks at six emerging clean technologies in the U.S. that will play a crucial role in the energy transition. The report examines electric vehicles (EVs), clean steel, low-carbon hydrogen, long-duration energy storage (LDES), direct air capture (DAC), and advanced small nuclear modular reactors. According to BCG, the priority value chain segments within these technologies will achieve a domestic market size of $9-10 trillion in total by 2050 and produce more than $300 billion in annual export opportunities in the U.S., create millions of new jobs and improve the country’s energy security. (Carbon Herald)

AND FINALLY…

Reckless endangerment – New laws in Texas and other US states that punish financial firms for “boycotting” oil and gas endanger global financial stability by encouraging risky loans to energy firms, former deputy Treasury secretary Sarah Bloom Raskin has said. Large banks including JPMorgan Chase, Wells Fargo, NatWest, and Goldman Sachs will feel obligated to continue lending to energy companies at current levels even if there are good risk management reasons to cut back, said Raskin, who has also served as a US Federal Reserve governor. Her nomination to return to the Fed to head banking supervision by blocked by Republicans earlier this year. Raskin, now at Duke University, is concerned because the banks cited their lending to energy companies as proof they are not hostile to fossil fuel in official letters to the state of Texas earlier this year. Texas Comptroller Glenn Hegar then left them off the list of financial institutions that the state has earmarked for divestment. BlackRock and nine European asset managers and banks were not so lucky. (FT)

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