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TOP STORY
ANALYSIS: Europe’s dash for LNG to add to emissions leakage headache
Europe’s scramble to secure gas from alternative sources after Russia turned off the taps will see an increase in greenhouse gas emissions due to the ramping up of LNG imports that have an overall higher value-chain footprint than pipeline supply, with the additional discharges set to fall outside of the current scope of EU mechanisms.
EMEA
Euro Markets: Bulls drive strong settlement as traders eye cooler weather and end of auctions
EUAs extended Wednesday’s gains with a particularly robust gain at the end of the day, as traders continued to factor in the end of auctions and the expiry of December options and futures contracts, while energy markets were weaker after the European Union delayed the introduction of a price cap on gas.
European Parliament urges EU to exit controversial Energy Charter Treaty
The European Parliament sent a strong signal to the EU to withdraw from the Energy Charter Treaty (ECT) on Thursday, passing by a large margin of 303 votes a non-binding resolution urging the bloc to exit the pact due to its incompatibility with EU climate law and policy.
EU not yet ready to ‘open the champagne’ as gas price cap talks fall short
EU energy ministers dismissed the gas market correction mechanism proposed by the European Commission during a heated discussion on Thursday that also leaves in limbo a series of other emergency measures designed to tackle the bloc’s energy crisis.
AMERICAS
NA Markets: CCAs slide into and post WCI Q4 auction, RGGI remains steady on spreads
California Carbon Allowance (CCA) values slid in the days running up to and after Q4 WCI results results were published on Wednesday, while RGGI Allowance (RGA) prices seesawed back and forth over the past week on high spread volume.
Canadian federal government to fund nature-based carbon capture research partnerships
Canada’s federal government has announced funding for three Canadian collaborative projects between conservation agencies, academia, and industry to quantify the carbon capture potential of wetlands, peatlands, and agricultural solutions that would contribute to the development of national and regional carbon protocols.
Oregon Clean Fuels Program credit shortfall persists in Q2 2022
The Oregon Clean Fuels Program (OCFP) continued to generate a credit shortfall through the second quarter of 2022, with a new quarterly high net deficit generation from petroleum-based gasoline, while volumes from renewable diesel dropped significantly compared to the prior quarter, according to state data published Wednesday.
ASIA PACIFIC
South Korea announces first batch of fixes to improve ailing ETS
South Korea on Thursday outlined a number of changes to its emissions trading scheme that it will implement in the near term to improve the effectiveness of the programme, while it will continue to work towards broader, more fundamental market reforms in the longer term.
Singapore rolls back GST on voluntary carbon credit transactions
Singapore’s goods and services tax (GST) will be waived for transactions in the voluntary carbon credit market, the government’s tax authority has announced.
Beijing carbon auction clears at floor price
Beijing sold only around half of the 2 million allowances on offer at Wednesday’s auction, which was held for emitters still needing to acquire units for 2021 compliance, with the sale clearing at the floor price.
INTERNATIONAL
Climate policy sequencing normally a prelude to carbon pricing, study finds
Climate policy sequencing has played an important role in the eventual adoption of carbon pricing policies as well as their level of stringency, with research showing that countries have normally implemented a series of climate policy measures before ultimately placing a price on emissions, an article published in an academic journal has found.
VOLUNTARY
After COP27, the private sector weighs in on carbon market rules
With several pointed issues better crystallised at the COP27 UN climate talks last week, stakeholders weighed in on Thursday about how these rules may be applicable to the voluntary carbon market (VCM).
COMMENT
Disagreements and debates at COP27 fail to deter the market
Hopes weren’t particularly high that this would be a blockbuster COP. Glasgow had done the hard yards of finalising the overarching rules on carbon markets, and even the Egyptian hosts were billing this as the “implementation COP”. But the markets seemed to come away full of optimism, writes Alessandro Vitelli.
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Tenders
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CONFERENCE
Asia’s largest carbon markets event is back! The International Emissions Trading Association (IETA) looks forward to welcoming delegates to its flagship Asia Climate Summit (ACS) 2022, being held Dec. 6-8 at the Marina Bay Sands Convention Center in Singapore. Everything you need to know about carbon markets in Asia in 3 days! Held in a hybrid format with both in-person and virtual offerings, the programme brings together leading private sector experts and policymakers from both the carbon and energy world to discuss the current state of play, and what’s next for compliance and voluntary markets. An ideal forum to take stock of the world’s evolving net zero landscape and clean growth opportunities. Organised by IETA, in collaboration with ICAP and the IEA.
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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
EMEA
Fill the tanks – The European Commission has set out the intermediate gas storage filling targets that member states should meet next year in order to reach the 90% gas storage target by November 2023. Foreseen under the Gas Storage Regulation, agreed in June 2022, the implementing regulation defines the intermediate targets to be achieved by February, May, July, and September 2023 for countries with underground storage on their territory and connected to their market area. These trajectories are aimed at enabling member states to fulfil the 90% storage target by Nov. 1 of next year. The targets are based on the proposals made by each country in their storage plans, submitted in September, the filling rates of the preceding five years and the Commission’s assessment of the general security of supply situation.
Soaring costs – Energy regulator Ofgem will raise its price cap for the average UK home by 21% to £4,279 from January, underscoring the growing gap the government has to plug to maintain its price freeze, Bloomberg reports. The UK pledged to keep tariffs capped at levels that equate to £2,500 until April, leaving a nearly £1,800 gap per household for the government to subsidise this winter. The government has been augmenting Ofgem’s price cap since October in an attempt to shield households from the worst energy crisis in decades. “The Energy Price Guarantee is protecting consumers from soaring energy costs, meaning people’s bills will not rise in line with today’s Ofgem energy price cap increase,” a spokesperson for the UK’s department for business, energy and industrial strategy said in a statement. The government has been forced to cut back on its support for households amid rising wholesale costs. Finance minister Jeremy Hunt increased the energy price guarantee to £3,000 from April. That’s roughly triple a typical annual energy bill before the crisis started last year.
French fund hits target – French investment company Eurazeo raised €210 mln in the first close of its transition infrastructure fund, which will be used to support projects in energy transition, digital transition, clean transport, and circular economy, the company announced Thursday. The fund’s focus is Europe, and it has already invested in three projects: Ikaros Solar, A Belgian rooftop solar provider; Resource, a joint venture with Quantafuel for a plastic waste sorting plant in Denmark; and Electra, a French company specialising in fast charging of electric vehicles. The European Investment Fund made a cornerstone investment of €75 mln, Eurazeo added $100 mln, and the remaining €35 mln came from several institutional investors. Eurazeo has a diversified portfolio of €32.4 billion in assets under management, including nearly €23.2 bln from third parties, invested in 530 companies.
State aid – The European Commission approved on Thursday a Portuguese state aid scheme, worth €175 mln, to help companies that make intensive use of energy to face high electricity prices. The scheme is intended, according to a statement from the community executive, to partially compensate energy-intensive companies for higher electricity prices resulting from the impact of carbon prices on electricity production costs, or the so-called ‘indirect emission costs’, incurred between 2021-2030, under the EU ETS. The measure will benefit eligible companies “that face significant electricity costs and are particularly exposed to international competition”, with state aid granted through a partial refund of indirect costs of GHG emissions incurred in the previous year. The final payment is due in 2031.
First landing – The first ship designed to convert LNG back to gas has arrived in Germany, Deutsche ReGas, the company developing the country’s Baltic Sea LNG terminal, announced. The specialised ship – a floating storage and regasification unit (FSRU) – arrived at the island of Rugen in the Baltic Sea for a stopover before continuing to the industrial port of Lubmin. There, it will be installed to fit the onshore German system. The LNG import terminal will have an annual capacity of 4.5 bcm. From a technical standpoint, it could be in operation by Dec. 1, according to the company. (Clean Energy Wire)
On sale – Bourse EEX has published the 2023 sales calendar for Germany’s domestic carbon pricing scheme (nEHS). The sales will take place twice a week throughout the year, on Tuesdays and Thursdays. Participants will be able to purchase nEHS certificates on these days between 0900 and 1500 CET. The first sales date will take place on Jan. 10, and the last on Dec. 7. On these dates, companies obligated under the programme can purchase permits at a fixed price of €30 each. In addition, between January and September 2023, a limited number of post-purchases of vintage-2022 nEHS certificates will be possible, also at a fixed price of €30 euros/tonne. Companies must surrender nEHS certificates to cover their 2022 emissions by Sep. 30, 2023. The last sales date with the possibility of post-purchases of 2022-vintage certificates is therefore Sep. 21. Since the start of the nEHS sales in Oct. 2021, more than 391 mln certificates have been sold via the EEX platform.
ASIA PACIFIC
Actions needed – The majority of China’s top carmakers have no plans to phase out internal combustion engine vehicles despite public statements that echo Beijing’s net zero pledges, according to a new Greenpeace East Asia analysis of climate action by China’s 10 biggest carmakers. In addition, targets set by GAC, FAW, BAIC, Great Wall, and Chang’an lack either a reduction target timetable, clear scope of commitment, or both, the analysis found. In 2021, China’s car industry had a carbon footprint of 1.2 bln metric tons, higher than the annual CO2 emissions of Japan.
New plan – The government of Guizhou, a landlocked province in southwest China, has released a comprehensive draft plan to push for reforms in the local coal and power market, as part of a broader commitment to peak its emissions by 2030, according to an official statement released on Wednesday. The provincial authority also aims to pour more resources into the development of forestry and karst-related carbon sinks, it said. Guizhou is among China’s least developed provinces, and is one of a number of Chinese regions actively looking to explore the potential of nature-based solutions.
Shale oil discovery – China’s largest oil refiner Sinopec said it has discovered a shale gas exploration well in southwestern Sichuan basin with proven reserves of around 146 bln cubic metres, according to a company statement released Wednesday. This came after the oil giant in October announced the discovery of new shale gas reserves in the basin, which has an estimated resource capacity of nearly 388 bln cubic metres. China has also unlocked several shale oil fields at eastern and northeastern mature oilfields, Reuters reports.
Gas plant down – Australian utility AGL has announced it will shut down its Torrens Island “B” gas power station in South Australia in 2026, nearly a decade earlier than expected, ABC reports. The energy giant originally flagged it would cease all operations in 2035, to transform it into a low-carbon industrial energy hub. The new closure date of June 2026 will coincide with the planned completion of the state’s new interconnector with New South Wales. The first of the station’s four B units was mothballed in October 2021 and all four will close on June 30, 2026. Energy Minister Tom Koutsantonis said the station’s closure should not negatively affect South Australia’s power supply, but it was a blow to the state’s “sovereign capability”. “We will have enough power to supply ourselves and it won’t be closing for another four years,” he said. “But what it does show is that when you interconnect with larger jurisdictions you displace all your own thermal capacity.” AGL chief operating officer Markus Brokhof said closing was a “tough decision” but the Torrens Island B station, which began operations in 1976, was losing millions of dollars.
AMERICAS
You need to adapt – The Canadian federal government will spend C$1.6 bln in new funding for climate adaptation, which will involve protecting biodiversity, maintaining infrastructure, and disaster preparedness, an announcement on Thursday said. Environment Minister Steven Guilbeault said national flooding and wildfire standards alone could save the country C$4.7 bln per year. The federal government created the strategy after consulting with the provinces, territories, municipalities, and First Nations, who will all have 90 days to comment on the initiative. (Reuters)
Hey, that’s our money – Saskatchewan Premier Scott Moe says he’s interested in investing carbon tax money into nuclear technologies should the province obtain hundreds of millions of dollars held by the federal government. Moe told reporters this week that nuclear investment is among many potential options, as he strives to secure roughly C$480 mln in carbon tax dollars that SaskPower paid to the federal government over the past few years. Moe said he believes the dollars belong to the province, adding they need to be used on innovative technologies that reduce carbon emissions. The province has been looking into potentially building a small modular nuclear reactor as part of the future power grid. Saskatchewan will next year expand its OBPS programme to cover the electricity and natural gas pipeline transmissions sectors, which were previously covered by the federal backstop. (Regina Leader-Post)
Honduran endurance – Honduras plans to follow Gabon in attempting to issue its pre-2021 REDD+ forest protection results to the voluntary carbon market as credits minted on the REDD.plus platform, Bloomberg reports. It will start a review in January, with the aim of submitting at least 5.5 mln units to turn into carbon credits, Malcolm Stufkens, the country’s vice minister for environment, said. The Coalition for Rainforest Nations, of which Honduras is a member, said the units from Honduras, together with 7.7 mln from Belize, will likely be issued in Q1 next year. Papua New Guinea is expected to issue more than 90 million of the units with the same aim later that year. Read Carbon Pulse’s extensive reporting on the REDD.plus sales process.
AVIATION
High flyers – A global levy on frequent flyers could generate significant revenues towards the annual investment of $121 bln that ICAO estimates is required for the aviation sector to reach its 2050 net zero climate target, finds a study by the non-profit research group International Council on Clean Transportation (ICCT). It argues a variable levy based on flying frequency would focus the tax burden on wealthier frequent flyers – those defined in the study as taking more than six flights a year – and help ensure that people with lower incomes are not priced out of air travel because of climate policy. The study looked at two potential models: a flat per-flight tax or a frequent flying levy (FFL). Raising $121 bln in 2019 would have required a flat $25 tax on each one-way flight or a progressive FFL starting at $9 for a person’s second flight to $177 for their 20th flight within the same year. At the recent COP27 climate conference, the EU’s chief representative suggested a levy on aviation could be a source of finance for the loss and damage fund agreed at the talks. (GreenAir News)
VOLUNTARY
Offset retailing – Oil major Shell is one of the world’s biggest investors in carbon offsets, and is rolling out a series of channels through which it can sell on some of the credits it is involved in generating. Shell Pakistan and the local financial wellness platform ABHI on Thursday signed the first agreement for Shell’s new voluntary carbon compensation programme in the country, according to the publication Pakistan Revenue. This programme provides an avenue for all ABHI employees who are using Shell Fuel Cards to offset hard-to-abate carbon emissions from their fuel consumption by using Shell’s global portfolio of carbon credits.
AND FINALLY…
Gift horse mouth – Last summer, CarbonPlan, a California-based nonprofit that researches climate solutions such as carbon capture, received an email from a prospective individual donor named Keith Lennox. Lennox, who emailed from his personal Gmail account, said he wanted to make a donation of more than $100 – which, at the time, was the limit on individual donations that CarbonPlan was accepting. After a due diligence screening, CarbonPlan provided Lennox with wire transfer information so he could make his donation. A few days later, Lennox emailed CarbonPlan again – but from an FTX email address (FTX is the large crypto exchange that’s recently gone bust). Lennox, who now identified himself as an FTX employee, requested a second meeting, this time to discuss carbon offsets. Jeremy Freeman, CarbonPlan’s founder and executive director, says he took the meeting via Zoom and expressed his skepticism about carbon offsets, a credit-based scheme through which organisations trade carbon ‘credits’ to reduce overall emissions. There was no discussion of any gift from FTX, says Freeman. Following that meeting, FTX “unilaterally decided to wire us $200,000 via the banking information we had earlier provided to Mr. Lennox under our assumption that he wanted to make a much smaller donation in his personal capacity,” according to Freeman, who detailed his organisation’s bizarre experience with FTX in emails with Forbes. “To be clear, I neither solicited nor agreed to accept any donation from FTX or its affiliates; they simply wired us the money,” says Freeman. Keith Lennox did not respond to Forbes’ requests for comment. FTX did not respond to Forbes’ questions. CarbonPlan ultimately decided to keep the money. “[We] decided that returning unrestricted funds wouldn’t address our general concerns with the crypto industry,” says Freeman. CarbonPlan used the money in part to finance its research on the ineffectiveness of migrating carbon offsets onto the blockchain, which it published earlier this year. That research found that the largest carbon offset “tokenization” scheme was recycling junk offset credits that couldn’t find buyers in conventional markets. CarbonPlan wasn’t the only nonprofit to receive an unsolicited donation from FTX, but it’s unclear exactly how much money the company’s foundation has given. As of a few weeks ago, FTX said it had donated $190 mln, but at least five grantees who spoke with Forbes disputed the numbers on Future Fund’s and the FTX Foundation’s websites. But Forbes found that several groups listed by FTX as recipients didn’t receive the full allocated funds, and in come cases, they received none at all.
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