CP Daily: Thursday December 1, 2022

Published 03:58 on December 2, 2022  /  Last updated at 04:31 on December 2, 2022  /  Newsletters  /  No Comments

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

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TOP STORY

Guyana nets 33 mln carbon credits in inaugural jurisdictional REDD+ issuance, first sale imminent

Guyana has received millions of The REDD+ Environmental Excellence Standard (TREES) credits from the Architecture for REDD+ Transactions (ART) programme, becoming the first government to earn the jurisdictional-scale offsets and the first ever recipient of TREES units, and will announce its first sale of the units on Dec. 2.

AMERICAS

California, Washington set near identical 2023 auction reserve prices

The California-Quebec carbon market and Washington’s cap-and-invest scheme announced on Thursday near identical auction floor prices and allowance price containment reserve (APCR) levels for 2023, with the linked WCI programme also setting next year’s sale volumes.

California offset usage against 2021 emissions declines as DEBs total exceeds 50%

California compliance offset retirements fell sharply during the 2021 interim cap-and-trade deadline, dropping by more than half versus the 2018-20 period, as emitters faced a lower usage cap and were required to turn in more credits with direct environmental benefits (DEBs) to meet newly implemented restrictions, according to official data published Thursday.

NA Markets: CCAs pressured by November auction result and ETF selling, RGGI prices decline before Q4 sale

California Carbon Allowance (CCA) prices fell this week as traders rolled their positions further out on the curve before surging back on Thursday, while RGGI Allowance (RGA) values declined on similar activity ahead of next week’s quarterly auction.

Developer reportedly pulls out of Washington state forest carbon project

A major forest carbon developer has reportedly withdrawn from a project in Washington state that was forecast to yield almost 1 million voluntary credits.

California’s forest carbon offset programme “not doing much” for climate, scientists warn

California’s forest offset projects are not seeing more carbon stored within them or lower logging levels, according to scientists, raising concerns that these initiatives largely ineffective.

US EPA proposes next three years of RFS quotas, ‘e-RIN’ pathway

The US EPA on Thursday published preliminary Renewable Fuel Standard (RFS) blending quotas for the next three years, and also proposed a pathway for electricity to generate credits (RINs) under the federal biofuels programme.

EMEA

Euro Markets: EUAs give up 4.8% gain after hedging demand dries up and profit-taking takes over

EUAs rose as much as 4.8% to a new three-month high in Thursday before erasing almost €5 from the price in a little over two hours as demand from options hedging ended suddenly amid a reversal in energy markets and as profit taking took over.

ANALYSIS: UKA premium to EUAs disappears amid reduced UK spread interest as funds cut length

The premium of UK carbon prices to their European counterparts has eroded completely in the last two months as the two markets have moved in opposite directions since the differential reached its peak in September, and funds have amassed a net short position in the UK market.

EU institutions on ‘same side’ in defending Innovation Fund from REPowerEU funding raid, says lawmaker

The European Commission and Parliament agree the size of the Innovation Fund is crucial to support industry decarbonisation, the Parliament heard on Thursday, with lawmakers calling for unity against a member state plan to divert some of the Fund’s carbon market revenue to the REPowerEU initiative.

EU climate plan risks sacrificing carbon storage and biodiversity for bioenergy boost -report

The EU’s flagship Fit for 55 climate plan is set to outsource deforestation and sacrifice carbon storage and biodiversity in Europe in an effort to drive bioenergy expansion, according to a paper published in a research journal that points out one amendment under consideration could reduce this risk.

Wintershall to develop North Sea CO2 hub with partners as part of giant Greensand CCS project

German oil and gas producer Wintershall Dea has signed an agreement with other companies to develop a CO2 hub in the Danish North Sea, a project that will be linked to the giant Project Greensand offshore CCS project, it was announced on Thursday.

ASIA PACIFIC

China set for rapid decarbonisation in power sector, though more is needed to reach 1.5C -report

Rapid decarbonisation in China’s power sector should put the country on 1.9°C pathway, though more actions are needed for the country to help limit global warming to 1.5C, a recent report has found.

Rio Tinto firms up role for offsets to help meet 2030 emissions target

Anglo-Australian mining company Rio Tinto aims to boost the role of offsets over the next decade to help meet its 2030 climate target, it announced at an investor seminar Thursday, where it laid out details about its $7.5 billion investment plan across several abatement programmes to cut its operational emissions in half by the end of the decade.

Australia on track to cut emissions by 40% by 2030 and must move faster, Climate Change Authority says

Australia will have to increase its emissions reduction rate to about 17 MtCO2e per year – a 40% increase from current rates – if it intends to reach its 2030 and 2050 climate goals, the country’s climate change minister said in a speech to parliament on Thursday.

South Korea announces two more ETS market makers, increases KAU holding limits

South Korea on Thursday named two more securities firms that will act as market makers in the nation’s emissions trading scheme while at the same time more than doubling the KAU holding limits for financials in a bid to boost market liquidity and stabilise prices.

Taiwan should prioritise biomass carbon sinks to reach net zero -report

Taiwan should prioritise the development of biomass carbon sinks and emerging nature-based solutions to help reach its 2050 net zero targets, a government-funded research institute has urged.

VOLUNTARY

Canada-based global wealth firm launches international forest carbon fund

A Toronto-headquartered global asset manager announced on Thursday a new forest fund to invest in internationally diversified forestland assets with strong carbon storage potential and high conservation value.

Swiss Re signs deal to buy large volume of biochar credits

Swiss Re has extended its portfolio of biochar-based carbon credits by signing a large multi-year offtake agreement with German-based digital MRV marketplace Carbonfuture, the two companies announced Thursday.

VCM Integrity Council appoints Indigenous, other members

The Integrity Council for the voluntary carbon market (IC-VCM) announced the appointment of three new members to its governing board on Thursday, including two Indigenous Peoples members, fulfilling a long-standing promise from the cross-stakeholder initiative, which aims to provide guidance on what constitutes “high quality” for voluntary carbon offsets.

INTERNATIONAL

Countries warned to keep ‘cheap’ abatement at home as Paris goals loom

Countries should use their “own” cheap abatement for their own climate targets, a leading COP27 negotiator told a webinar Thursday after pointing out that costs to meet net zero are going to rise.

Prescribed increase in global carbon prices could wreak havoc on equity valuations -analysis

The sensitivity of equity markets to carbon pricing risk has increased over the past 12 months due to rising energy prices and geopolitical tensions, according to a new study.

BAVARDAGE

Article 6 emissions trade expert leaves buyer to form advisory venture

The US EPA on Thursday published preliminary Renewable Fuel Standard (RFS) blending quotas for the next three years, and also proposed a pathway for electricity to generate credits (RINs) under the federal biofuels programme.

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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

INTERNATIONAL

Go with the ESG flows – Global climate flows are on track to surpass $900 bln in 2022, up from some $815 bln in 2021, according to the Institute of International Finance, with investment in renewable energy and EV sectors remaining strong. In a turbulent and volatile market environment, flows to ESG funds have seen a sharp retrenchment year to date. However, they are still in positive territory – in sharp contrast to large outflows from non-ESG funds. Global sustainable/ESG debt issuance amounted to some $950 bln in the first three quarters of 2022 and is on track to reach $1.3 trillion by the end of 2022 – a bit softer than the $1.5 trillion seen in 2021, but resilient compared to non-ESG debt issuance. Sustainability-linked loans have been the fastest growing segment this year, the IIF said. In a weak market for overall global car sales (on track to hit the lowest level since 2011, given rising rates and high energy prices), electric vehicle sales continue to grow rapidly, with the US Inflation Reduction Act helping to accelerate them. Romania, Ethiopia, and Costa Rica have the top ESG country scores in IIF’s sample of emerging and frontier market economies, reflecting their strong performance on carbon efficiency and environmental factors.

EMEA

Fossil politics – Over 90 climate and social justice groups from 15 countries are calling on the European Parliament “to hold fossil fuels accountable for their role in the cost of living and climate crisis”, they tweeted on Thursday. By signing the “Fossil free politics” petition, the organisations asked to remove lobbyists’ parliament badges, organise a public hearing making fossil companies accountable for the inflation, and adopt a conflict of interest framework. In a Twitter thread, they pointed out that “seven in 10 Europeans are struggling with basic bills, while fossil fuel giants announce a record €79 bln in profit and EU leaders have met with fossil fuel lobbyists 100 times since February 2022”. Among the signatories are Bankwatch, Corporate Europe Observatory, Don’t gas Africa, Friends of the Earth Europe, Global Witness, Greenpeace, ReCommon, and Urgewald.

State aid – Energy intensive companies in France will get €13.5 bln in state aid to compensate for indirect emission costs. The European Commission has cleared the scheme, covering part of the increase in electricity prices incurred between 2021 and 2030 due to the ETS. Margrethe Vestager, executive vice-president in charge of competition policy, said this measure “will allow France to reduce the risk of carbon leakage” and “maintains the incentives for a profitable decarbonisation of the French economy, in line with the objectives of the Green Deal, while limiting undue distortions of competition”. 

Just transition – The Latvian regions of Vidzeme, Latgale, Zemgale and Kurzeme will receive €192 mln under the European Just Transition Fund (JTF) to phase out of peat for energy generation by 2030. The money will also go to peatland restoration, reducing emissions, and improving the local environment and biodiversity. Moreover, the EU is investing in innovative business infrastructures for small and medium-sized businesses, as well as solar energy and biomass. Finally, 1,600 workers of the peat and other affected sectors will be supported with reskilling and upskilling.

Full wind ahead – The boss of one of the world’s biggest renewable energy companies, Iberdrola, told the UK government it will boost investment despite a windfall tax on low-carbon power producers. Iberdrola’s Executive Chairman Ignacio Galan met finance minister Jeremy Hunt this week following the government’s decision to tax what it calls “excess profits” of wind and solar energy producers. The renewable industry has said the tax threatens to curb investment in a sector that’s vital to shifting the UK away from a dependence on fossil fuels and reaching its goal of net-zero greenhouse gas emissions by 2050. (Bloomberg)

AMERICAS

Good news – Deforestation in Brazil’s Amazon rainforest fell in the 12 months through July, according to government data released Wednesday, retreating from a 15-year high under outgoing President Jair Bolsonaro. The destruction declined 11% from a year earlier to 11,568 sq km (4,466 sq miles), according to the annual data from Brazilian space research agency Inpe. That was still more Amazon deforestation than any year from 2009 to 2020. “It’s better to have a lower number than a higher number, but it’s still a very high number – the second highest in 13 years,” said Marcio Astrini, head of environmental advocacy group Climate Observatory.  Ane Alencar, science director at the Amazon Environmental Research Institute, said that there has been no change in Bolsonaro’s policy of weakening environmental agencies to explain the drop in deforestation. Both said that it was impossible to know immediately why deforestation fell, saying perhaps weather or economic cycles could be a factor. (Reuters)

Island exception – The Canadian maritime province of Prince Edward Island (PEI) will keep its gas tax cuts despite the federal CO2 pricing benchmark prohibiting rebates that offset the impact of Canada’s price on carbon, a provincial official said Wednesday. PEI will continue to subsidise gas to the tune of three cents per litre, meaning the federal carbon tax’s impact on the price of gas will be halved next year. Canada’s price on carbon is going up from C$50/tonne in 2022 to C$65/tonne in 2023 and will keep increasing by C$15/tonne per year until reaching C$170/tonne by 2030. PEI, along with Newfoundland and Labrador and Nova Scotia, will become subject to the federal ‘backstop’ CO2 levy on July 1. (Saltwire)

Pathway to net zero – Canadian oil and gas producer Canadian Natural Resources announced higher GHG emission reduction targets in their 2023 budget release. The company plans to reduce total corporate Scope 1 and Scope 2 emissions by 40% by 2035 from a 2020 baseline, and has an aspirational goal of achieving carbon neutrality in the oil sands. Along with The Pathways Alliance – a group of Canada’s largest oil and gas producers – the company is progressing with Phase 1 of its net zero goal, which includes an interim target to reduce 22 Mt/yr of GHG emissions by 2030 through carbon capture and storage technology, as well as other emission reductions technologies such as solvents, energy efficiency, cogeneration, and electrification, the company press release noted. Members of the Pathways Alliance have completed feasibility studies and are advancing engineering work and environment field programs, the company added.

Opinions stay wrapped – A Charlottesville, Virginia Circuit Court upheld the decision of the Attorney General’s office not to release its opinion on whether a withdrawal from the 11-state RGGI power market would violate state law, according to a press release from The Southern Environmental Law Center (SELC) that had filed the lawsuit on behalf of green group Appalachian Voices earlier this year. The lawsuit was an attempt to obtain the release of the AG’s opinion, which both the state Air Pollution Control Board (APCB) and the Attorney General’s office withheld under the Virginia Freedom of Information Act, despite a member of the APCB disclosing its existence and contents at a public meeting in April. SELC and its client, Appalachian Voices, are reviewing the decision and considering next steps, the organisation noted in its press statement. The APCB on Dec. 7 will take up a proposed regulation to rescind the state’s RGGI linked cap-and-trade regulation at the end of 2023.

Feeling the (clean) heat – The Massachusetts Commission on Clean Heat’s final report released Wednesday recommended that the state develop and implement a “clean heat standard” that could incentivise cleaner heating technology and promote the electrification of building stock, encourage joint natural gas and electric system planning, and reorganise existing energy efficiency and clean energy transition programmes to be more user-friendly for residents, businesses and contractors, among other proposals. The commission’s report attached some urgency to the recommendations. The residential and commercial building sector-specific sublimits established in keeping with the state’s 2021 climate law require a 28% reduction in emissions by 2025 and a 47% reduction by 2030, all compared to the baseline of 1990 emissions. As of 2020, the commission said, emissions for the residential and commercial buildings sector were 18% below 1990 levels. (Worcester Business Journal)

Hurry up – Bloomberg spotted something interesting in Barclay’s Q3 earnings presentation: The banking giant is accelerating its exit from US coal financing and citing the US climate law as a reason. Considering the law and “other business factors,” Barclays plans to move the phaseout date from 2035 to 2030, CEO C.S. Venkatakrishnan recently told analysts when reporting Q3 results. He called this consistent with the UK-based bank’s approach in Europe. (Axios)

ASIA PACIFIC

Long way off – Environmentally-friendly steel on a commercial scale in Asia is still decades away as the use of hydrogen to replace coal-fired furnaces in production is a long way from being commercially viable, according to Australian mining giant BHP, South China Morning Post reports. The relative youth of the region’s fleet of traditional blast furnace steel plants – averaging 12 years in China and 18 years in India – means it would be difficult to justify the costs of converting them to hydrogen-enabled direct reduced iron (DRI) facilities, said chief development officer Johan van Jaarsveld. “The adoption of hydrogen in steel making – the replacement of blast furnace iron with direct reduced iron – is something possible in the future,” he said. “However, we don’t think that is something that is going to happen in material quantities in this part of the world for another few decades. The reason is just costs.” For DRI to be economically sustainable in Asia, the price of each tonne of carbon dioxide emitted would need to rise to US$100, and the price of green hydrogen fall to US$1 per kilogram, he said.

Hours and days — The Australian Energy Market Operator (AEMO) has laid out an engineering roadmap it needs to operate the country’s main grid on 100% renewable power for “hours and days” at a time, as soon as 2025, RenewEconomy reports. “Preparing for high instantaneous penetrations of renewables – and the first period of 100% instantaneous operation – is a critical part of enabling future power system operability at net-zero emissions,” AEMO chief executive Daniel Westerman said. He said there were two main challenges to achieving this, the first is dealing with variability or output, which will require significant levels of storage, and demand management, the second is managing the changed system, which would be based on inverter-based technologies, rather than traditional synchronous generation. AEMO has to be to manage the transition and switch between the two different systems, and keep the lights on at the same time. It estimates the National Electricity Market will need the equivalent of 40 synchronous condensers to accommodate the 100% renewables scenario.

CCS sign-off – Malaysia’s energy giant Petronas has taken a final investment decision (FID) to develop a carbon capture and storage (CCS) project off Sarawak, Offshore Energy reports. To this end, an engineering, procurement, construction, installation and commissioning (EPCIC) contract has been awarded to Malaysia Marine and Heavy Engineering Holdings Berhad (MHB). Petronas Carigali (PCSB), a wholly-owned subsidiary of Petronas, confirmed that the FID for the development of its Kasawari CCS project off the coast of Sarawak, which was approved on 20 Oct., was followed by the award of the EPCIC contract. This project is expected to pave the way forward for future decarbonisation plans for Petronas and Malaysia, supporting the firm’s progress towards its net zero carbon emission (NZCE) targets by 2050. MHB claims that the Kasawari CCS project will be “the largest offshore CCS project in the world by volume of carbon dioxide captured,” with the ability to capture up to 3.3 million tonnes per annum of CO2.

VOLUNTARY

Gem of a deal – Carbon Trade Exchange (CTX) and Global Environment Markets (GEM) have signed an agreement with Nigeria-headquartered services firm Ecologistics as they aim to drive the African continent’s carbon market involvement, including under the Paris Agreement. CTX, GEM, and Ecologistics will collaborate to expand GEM’s national carbon meta-registries that have been set up to support the development of carbon markets, bilateral carbon transfer between countries, and voluntary markets in Africa. Overall, the partnership aims to ready carbon credits for global trade via an electronic interface hosted by CTX. GEM’s technology infrastructure will then also provide capacity to governments to support their commitments and eventually trade credits under Article 6. (Business Wire)

Enviva la vida – Global biomass producer Enviva and forest carbon credit developer GreenTrees announced Thursday a nine-year partnership that will see the purchase of 90,000 offsets to be used against about 14% of Enviva’s 2021 Scope 1 carbon footprint. The GreenTrees afforestation projects with Enviva will take place in the rural US Southeast on land formerly used for agriculture but has been deemed no longer suitable for farming and crop growth due to soil erosion and water damage. The afforestation of this land will not compete with lands used for agricultural and food sources, but will revitalise the land and serve as permanent carbon removal, the companies noted in their press release. The partnership will also provide a new source of income for rural landowners in the GreenTrees programme who are no longer able to use the land for agriculture. All voluntary carbon credits in GreenTrees’ projects are verified by the American Carbon Registry. In winter 2022/2023, GreenTrees’ credits will be the first reforestation credits to be auctioned on ICE, the statement noted.

On the move(2Zero) – Las Vegas-headquartered Southwest Gas this week introduced its Move2Zero Program, which provides eligible Nevada customers with the opportunity to offset GHG emissions generated from their natural gas usage. In a press release, the company said for $5 per month, Southwest Gas will purchase and retire carbon offsets on its customers’ behalf to offset emissions generated from a “block” of natural gas usage, which currently equates to 10 therms of combustion related GHG emissions. Southwest Gas is currently supporting two offset projects: the Prairie Pothole Avoided Conversion of Grasslands and Shrublands project in North Dakota; and the Granger South Jordan Landfill Gas Destruction Project in Utah.

Shopping guide – E-commerce giant Shopify has released a carbon removals buying guide, aiming to share its learnings since starting its own major screening and purchasing programme in 2020. The guide outlines the business case for purchasing carbon removals now, the best places to buy credits and post-purchasing steps to follow. It advises the buying of solutions that have the potential to reach a low cost at scale, prioritising projects that “get close to or below $100/tonne at scale”.

Partners – Climate action platform Cloverly has joined Visa’s Fintech Partner Connect programme to bring carbon credits to financial services companies. Through this initiative, Cloverly will engage with banks, financial services, and fintech companies that want to help their customers drive climate action through contributions to “high-quality” carbon credits. Cloverly is an API-first platform for carbon credits, offering infrastructure to help any product to become climate positive. It provides a scalable solution that enables businesses and consumers to take direct action toward climate change by offering a technology-enabled way to channel funds toward climate projects with real impact.

AND FINALLY…

$wedish $oil – A new Swedish platform, Svensk Kolinlagring, has launched soil carbon credits in the country that will cost investors $215, with added provisions that buyers must demonstrate an emissions reduction target aligned to the 1.5 C warming limit of the Paris Agreement and that the credit cannot be resold. The carbon credit will cost 1,800 Swedish krona, or around $172, excluding value added tax of 25%. Svensk Kolinlagring, a not for profit startup, calculates that it will be possible to sequester one tCO2 per hectare of farmland every year. Sweden has three mln hectares of farmland. Svensk Kolinlagring has worked for three years to develop the sequestration model for agricultural land, piloting projects with 12 development partners and 40 farmers. Farmers wanting to participate in the programme must show they have live crops in fields, covering at least 70% of the land for more than ten months of the year. They must also show is diversity in the crops grown, and the land is covered, with live and dead crops for 90% of the years.

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