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ANALYSIS: Market fears pause in issuances, project funding after Indonesia releases carbon trading rules
Indonesia’s sectoral requirements for selling carbon credits could interrupt project funding and potentially delay new issuances in one of the voluntary carbon market’s biggest host nations by at least a year, according to market experts.
The current global energy crisis can prove to be a historic turning point towards a cleaner energy future, the International Energy Agency (IEA) has stated, as the Paris-based energy watchdog projected for the first time that global demand for each of the fossil fuels will either peak or plateau across all the scenarios in its latest annual World Energy Outlook (WEO) released on Thursday.
The past year has been “wasted” as nations’ updated climate plans accounting for a 1% reduction in emissions, according to a UN report published on Thursday, meaning the world will need to see dramatic societal and sectoral change this decade to avoid climate disaster.
Climate Investment Funds said on Thursday that it will earmark $1 billion to help South Africa and Indonesia transition away from coal-fired power in the latest financing effort for emerging economies.
A group of companies announced on Thursday a multi-year trial of carbon capture technology in the steel sector, with an eye to support full scale deployment through a design and feasibility study.
The risk of significant heavy industry capacity reduction in Europe is increasing, as major metal and chemical producers warned this week that output cuts due to extreme energy prices may soon become permanent, with experts suggesting that this may not be fully priced into the carbon market.
Utility Vattenfall reported a slight cut in its ETS-covered generation over the first three quarters of 2022 on Thursday, while nuclear powerhouse EDF forecast a €32 billion hit to profits due to multi-year lows for its reactor availability that has driven demand for coal and gas even higher across Europe.
EU carbon resumed its rally on Thursday to erase the previous day’s losses and set yet another seven-week high as short covering and technical buying resumed, while energy markets stabilised as traders kept a watching brief for news of the EU’s plans to cap energy costs.
The EU’s carbon border adjustment mechanism (CBAM) needs to stay agile to recognise the evolving global geopolitical context and asymmetries of climate policies, with the US Inflation Reduction Act a prevalent example, a research group emphasised on Thursday.
Four member states are expected to exceed their non-ETS emissions obligations for 2021, according to EU data published this week that shows governments are struggling to meet their goals despite some already facing hefty costs from buying intergovernmental EU carbon units for the previous year.
Two Mexican legislators on Thursday put forth an initiative that would require offset project operators to meet new social and environmental standards, with the draft legislation unveiled in the wake of a controversy earlier this year in which rural land holders were found to be paid well-below market rates for their offsets.
California Carbon Allowance (CCA) prices broke out of rangebound trade this week as state regulator ARB prepares to hold a workshop on emissions modeling for the Scoping Plan, while RGGI Allowance (RGA) values continued their recent trend of following movements in the WCI market.
A proposal by California’s ARB to strengthen its carbon intensity (CI) reduction targets for transportation fuels is projected to deplete the state’s low carbon fuel standard (LCFS) credit surplus bank, leading to a recovery in credit prices, a webinar hosted by an analysis firm heard on Thursday.
Green groups assail legal rationale of repealing Virginia RGGI regulation, business calls for orderly exit
Virginia Governor Glenn Youngkin (R) does not have the legal authority to rescind the state’s RGGI-linked cap-and-trade regulation next December, while an orderly exit needs to be ensured should the state follow through with leaving the power sector market, according to public comments published this week.
Japanese Prime Minister Fumio Kishida has tasked the economy, trade, and industry ministry (METI) with hammering out a plan for how the nation’s current carbon pricing framework can be broadened out.
China’s environment ministry on Thursday said it will soon release for public consultation the plan for post-2020 emissions allowance allocation, a long-awaited regulatory document for market participants.
Australia Market Roundup: ACCU issuance up, Qantas invests in reef credits, ASX company fined for greenwashing
Issuance of Australian Carbon Credit Units (ACCUs) has crept up this week, while airline Qantas announced it would invest in GreenCollar reef credits and an energy company was fined A$53,000 ($34,000) by the market authority over greenwashing statements.
A group of four organisations have collaborated to set up a first of its kind agri-tech startup that aims to accelerate the decarbonisation of rice growing in Southeast Asia and the broader Asian region, they announced on Thursday.
One of the world’s biggest car manufacturers has teamed up with a leading carbon solutions provider to join the voluntary carbon market, opening a major call for submissions to develop offset projects and to buy credits from existing ones.
The value of the primary voluntary carbon market (VCM) is expected to increase 20% in 2022 to $1.2 billion as a year-on-year increase in credit prices outweighs a dip in retirement volumes.
Two Korean environmental and consumer rights groups have filed legal complaints over claims made by a major industrial conglomerate that the use of offsets from a controversial South American forestry project makes its engine oil product ‘carbon neutral’.
Certifier Gold Standard aims to develop a new framework to help design and develop climate adaptation projects, aiming to spur funding for an area that has historically struggled to attract as much funding as mitigation.
Financial firm raises A$55 mln to fund new nature-based carbon projects, expand data analytics platform
An Australian-based financial company has raised A$55 million ($35 mln) to go towards nature-based carbon credit projects and the roll-out of its data and analytics platforms.
A personal carbon footprint-cutting app has raised $10 million in Series A funding from a group of high-profile investors.
Project developer, Indian energy company partner to launch carbon credit marketplace with learning component
A major clean project developer is collaborating with an Indian energy company to launch a carbon credit marketplace that features an educational component.
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BITE-SIZED UPDATES FROM AROUND THE WORLD
Fit for cars – EU legislators have agreed the first element of the bloc’s Fit for 55 climate policy package, striking a political deal on CO2 emissions performance standards for cars and vans on Thursday evening in a closed-door trilogue negotiation. Pending formal adoption, the deal effectively bans the sale of new petrol and diesel cars from 2035. Negotiators from the three EU institutions also agreed an interim goal of a 55% cut in CO2 emissions for new cars sold from 2030 versus 2021 levels, well above the existing target of a 37.5% reduction. Read Carbon Pulse’s latest on how the car standard is one of three Fit for 55 bills that EU legislators are aiming to agree on before the Nov 6-18 COP26 UN climate talks in Egypt.
Get smart – Over 550 scientists have signed a letter to the European Commission, alerting them of the deteriorating state of European forests and calling for climate-smart forestry practices – including wood harvesting for bioenergy – to bolster their resilience to global warming. European forests are under growing pressure from rising temperatures, which cause more wildfires, pests and diseases that threaten their ability to store carbon dioxide and safeguard biodiversity. The letter, calls for “climate-smart forest management” to bolster European forests’ resilience and capacity to produce wood and grow carbon simultaneously. “If dry years become more frequent, we expect that forest biomass will decrease rather than increase in the next decade irrespective of management and protection,” it warns. Environmental groups say an easy win is to restrict the amount of woody biomass used in energy production, advice that the European Parliament broadly took on board. In September, lawmakers voted in favour of plans to end subsidies for biomass burned in power plants and to exclude most primary wood burning from the EU’s renewable energy targets. (Euractiv)
Survey says – A majority of EU citizens (66%) say that the war against Ukraine and its impact on the price of oil and gas should lead the bloc to speed up the green transition by reducing the consumption of fossil fuels, a survey conducted by the European Investment Bank shows. For Germany, however, this is true for only 54% of respondents, putting the country near the bottom of the EU ranking. The top three in the list are Croatia (81%), Italy (77%), and Hungary (77%). The remaining 34% (EU) and 46%(Germany) agreed with the statement that the bloc should “slow down the green transition to secure energy availability in the short term” in the first part of the 2022-2023 EIB Climate Survey. Germans say the priority of energy policy should be to diversify supplies to avoid dependence (39%), followed by expanding renewables (38%) and reducing the energy use of people and businesses (23%). 62% of Germans are in favour of “heavily taxing energy consumption that has a strong impact on climate and the environment” and 65% favour lower speed limits on motorways. (Clean Energy Wire)
Get moving – India will need to invest an estimated $12.1 trillion by 2050 to achieve carbon neutrality, consultancy McKinsey said in a report, with the effort requiring the country to dedicate 5.9% of its GDP towards climate finance. “India will need an estimated $7.2 trillion of green investments until 2050 to decarbonise in the LoS (line of sight) scenario and an additional $4.9 trillion for the ‘Accelerated’ scenario (about 3.5 percent and 2.4 percent of India’s GDP through this period respectively). 50% of the investment required for decarbonisation is economically viable, particularly across renewable energy, auto and agriculture; others would need policy support,” the report said. Listing 10 areas of action, the report recommended the implementation of a compliance carbon markets within the next three years. This, it said, will create demand signals, especially in the hard-to-abate sectors, and incentivise investments in natural climate solutions and newer technologies such as carbon capture, utilisation and storage (CCUS). India is the world’s third largest emitter, pumping out 2.9 bln tonnes of CO2 every year, equivalent to 4.9% of the global total. If this goes unchecked, India has the potential to generate 11.8 bln tonnes per year by 2050, the report warns. The primary driver of carbon emissions in India is the power sector, which accounts for 34%. This was followed by agriculture (18%) – primarily methane from cattle and rice cultivation. Other key emitters include transport (9%), water waste (6.2%), and buildings (4.5%). (Business Insider/The Hindu Business Line)
Hydrogen deal – Eneos, Hokkaido Electric Power, JFE Engineering Corporation, Hokkaido Electric Power Network, and Deloitte Tohmatsu Consulting were selected by the New Energy and Industrial Technology Development Organization (NEDO) to conduct a research project to build a large-scale green hydrogen supply chain in Hokkaido, according to an Eneos press release. Specifically, the research involves a 100 MW electrolyser that will produce about 10,000 tons of green hydrogen per year (equivalent to about 2 million fuel cell vehicles) in the Tomakomai region of Hokkaido.
Money MIA – Canada’s federal government has redirected carbon tax proceeds allocated for schools, municipalities, hospitals, and non-profits, as outlined in the government’s original documents in Dec. 2020, to Indigenous groups, farmers, and emissions-intensive trade-exposed businesses, according to Heather MacKenzie, executive director at non-profit Solar Alberta. An estimated C$610 mln ($450 mln) over four fiscal years – or 10% of the share of carbon tax funds – was promised to a list of provinces, including Alberta. But the money hasn’t been forthcoming, MacKenzie said. A spokesperson for Canada’s environment ministry said earlier this week that the minister of finance would announce new programming to deliver this funding in due course. The federal budget has allocated an estimated $1.5 bln in fuel charge proceeds collected between 2020–21 and 2022–23 to small and medium-sized businesses in jurisdictions that don’t meet federal carbon policy requirements. Roughly $120 mln in outstanding carbon tax revenues from 2019–20 would be returned through the same programme the budget detailed. (CBC)
Spending plans – US Treasury Secretary Janet Yellen met with 16 industry sectors representing clean power groups, utilities, labour unions, and others on Wednesday to develop rules for $270 bln in clean energy incentives available from the Inflation Reduction Act (IRA). The IRA has extended the 30% tax credits for wind, solar, and other renewable energy sources, offers incentives for carbon capture, tax credits of up to $7,500 for EVs, and credits to incentivise domestic production of solar panels or batteries. (Reuters)
Rider on the storm – The Virginia Supreme Court on Thursday threw out an appeal from green group Appalachian Voices that challenged the State Corporation Commission’s (SCC) decision to suspend Dominion Energy’s RGGI rider. The state agency last year granted Virginia utility’s request to recover $168 mln in RGGI allowance costs, but Appalachian Voices argued the SCC failed to apply the law when it approved the petition. However, the state’s highest court affirmed the SCC’s judgment.
Production line power – General Motors (GM) will be able to power all of its US facilities with renewable energy by 2025, five years ahead of the target announced in 2021, and 25 years ahead of the target set in 2016, according to a press release. GM said it will avoid emitting 1 mln tonnes of CO2 between 2025 and 2030 in its shift to renewables. The auto manufacturer said it also plans on becoming more energy efficient, working on greater power storage capacity, and advocating for improved transmission lines along with micro grids at the legislative level.
Dynamic display – Offset standard developer and manager Verra on Wednesday approved a first-of-its-kind VCS methodology for improved forest management (IFM) in the US and abroad. The methodology, developed by The American Forest Foundation (AFF) and The Nature Conservancy (TNC) for the organisations’ US-based Family Forest Carbon Program, is the first forest methodology under Verra to use a dynamic baseline rather than a project baseline. The methodology compares the carbon sequestered on lands enrolled in a carbon programme to a control group of highly similar forests that are not enrolled in the programme. By measuring the difference between the forests over time, the methodology isolates the programme as the key intervention that can be credited with creating the carbon benefit, providing more discernible proof of additionality, AFF and TNC said in a press release. (Read Carbon Pulse’s article on the methodology here)
Farming fun(d) – US-based farmland investment company LandFund Partners, in partnership with AgriCapture, is the first investment fund to be granted VERs from the Climate Action Reserve (CAR), it announced Thursday. LFP, which owns and manages more than 16,700 hectares, launched Soil Enrichment Fund (“SEF”) in 2021, an open-end liquid farmland fund committed to using regenerative farming techniques in order to create more climate-friendly farms. The first carbon credits have been issued as part of a pilot carbon credit project for two of LFP’s Arkansas farms. These pilot farms provided proof of concept, which has led LandFund to enroll their 15 farms comprising more than 10,000 ha in the project. Carbon credits for these additional acres should be received at some point in 2023.
Ratings rubric – Canadian startup crypto company DeepMarkit has signed an MOU with carbon credit ratings provider Renoster, with a view to hosting the scores on its MintCarbon.io platform that seeks to mint non-fungible tokens (NFT) and rewards project owners and carbon offset holders with a recurring revenue model.
SCIENCE & TECH
Bioreactor build – Biotechnology company LanzaTech on Thursday announced it has partnered on a next-generation bioreactor demonstration facility at the City of Edmonton’s Waste Management Centre that is expected to improve the economic viability of an integrated biorefinery. The demonstration facility, operated by Canadian oil firm Suncor, will convert waste-based feedstock, including municipal waste and forestry-residues, into ethanol and other chemicals necessary to make petroleum-free materials and goods. The ethanol produced from the biorefinery can be further processed into other products, including sustainable aviation fuel (SAF). The facility has the financial support of the Alberta government and the province’s Technology Innovation and Emissions Reduction (TIER) Fund through Emissions Reduction Alberta (ERA) and Alberta Innovates.
The problem with protectionism – A new study finds nationalistic policies to protect manufacturers of solar panels and other renewable technologies threaten to undermine global efforts to battle climate change, Bloomberg reports. Prices for solar modules could be as much as 25% higher than they would otherwise be by 2030 due to tariffs and other protectionist policies, according to the research paper published in Nature on Wednesday. The global solar supply chain saved the world as least $67 bln in production costs between 2006 and 2020, the study estimates. Protectionist measures would limit the free flow of goods, talent, and capital, slowing the global energy transition and encouraging more fossil fuel consumption, said John Helveston, author of the study and assistant professor of engineering management and systems engineering at George Washington University.
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