CP Daily: Wednesday December 14, 2022

Published 03:26 on December 15, 2022  /  Last updated at 03:31 on December 15, 2022  /  Newsletters  /  No Comments

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

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TOP STORY

EU legislators reach provisional deal on REPowerEU package

EU legislators reached a provisional deal early Wednesday on the REPowerEU package to accelerate the bloc’s exit from Russian fossil fuels, agreeing on a €20 billion tranche of new funding financed from ETS auctions that will come from a mix of three different sources.

AMERICAS

California carbon market watchdog to focus on no-trading zones, allowance supply adjustments in annual report

The forthcoming annual report from the California Independent Emissions Market Advisory Committee (IEMAC) will examine how no-trading zones for cap-and-trade facilities located near overburdened communities could work, as well as numerous other carbon market reform elements that could include significantly altering allowance supply.

Washington carbon market allowances to hit price ceiling near 2030 -analysts

Washington’s progress in achieving transportation sector emission milestones will be a key determinant of carbon market prices in the state, but allowance values will still skyrocket to the programme’s price ceiling regardless of this outcome, analysts said at a webinar held Wednesday.

California offset issuance ticks up, as DEBs premium reaches new high

Compliance offsets minted by California regulator ARB this week reversed course after falling for two consecutive periods, according to government data published Wednesday, while the price premium for credits with direct environmental benefits to the state (DEBs) climbed to a new all-time high.

Canadian asset manager launches second carbon offset fund

More than 30 investors have committed C$115 million ($84.7 mln) to a Canadian fund that will develop offset projects for the North American compliance and voluntary carbon markets.

Nova Scotia’s final carbon auction slumps 30% from prior sale, despite market need for allowances

The December Nova Scotia cap-and-trade auction cleared roughly in the middle of the scheme’s price floor and all-time high settlement, according to results published Wednesday, though companies are reportedly still very short as the Canadian province’s carbon market gets ready to wind down at year-end.

ASIA PACIFIC

Japan ministry proposes to move forward carbon levy start date

Japan’s Ministry of Economy, Trade, and Industry (METI) on Wednesday proposed to start taxing fossil fuel imports and some other carbon-related activities two years earlier than its previous proposal, as the government continues to work on its plan to gradually roll out a comprehensive carbon pricing system this decade.

Japan approves J-credit methodologies for hydrogen, ammonia

The committee overseeing Japan’s J-Credit programme has approved methodologies making the use of hydrogen and ammonia as fuel, as well as hydrogen fuel cell vehicles, eligible to earn carbon credits, opening up carbon market opportunities for the numerous Japanese firms involved in building hydrogen supply chains with other nations in the Asia-Pacific.

SK Market: Auction interest remains dim as lack of policy clarity sends KAU price crashing

Only four companies participated at Wednesday’s monthly KAU auction, with the clearing price dropping to a record low as traders await clarity on when the Korean carbon market will be aligned with the nation’s increased ambition under the Paris Agreement.

Korea can play a key role to boost green shipping -report

South Korea should use its influence as a global maritime leader to accelerate decarbonisation of the sector with a raft of policy measures that include expanding the scope of its own emissions trading scheme to include shipping, a joint report from two green policy think-tanks released on Wednesday said.

China steel industry group releases emissions reporting requirements for consultation

An industry association for China’s iron and steel sector has released a set of draft requirements for emissions accounting and reporting, as the ETS-destined industry is gearing up for its participation in the national carbon market.

Australian Greens secure “significant” electrification package in exchange for support of govt’s energy price control bill

The Australian Greens Party has thrown its support behind the government’s energy price control legislation, in exchange for an electrification package it says will accelerate the country’s decarbonisation efforts.

Global X launches synthetic carbon ETF on Australian stock market

A global carbon exchange traded fund (ETF) began trading on Australia’s local bourse Wednesday, part of larger trend of companies wanting to track allowance prices in the world’s emissions trading schemes.

EMEA

Euro Markets: EUAs recover from sharp drop as REPowerEU taps MSR

EUAs rallied after dropping to their lowest in ten days on news that co-legislators agreed to use some EUAs from the market stability reserve to help fund the EU’s efforts to shift away from Russian fossil fuels, while December options contracts expired quietly.

UK to present revised net zero strategy by March in wake of legal challenge

The UK will present a revised net-zero strategy by March of next year following a successful legal challenge that took aim at the lack of detail in how targets and reduction pathways would be achieved, a senior climate advisor to the government underlined on Wednesday.

INTERNATIONAL

G7 to provide Vietnam $15.5 bln to cut coal in JETP deal

A group of rich industrialised nations will provide Vietnam with $15.5 billion to aid the country’s transition away from coal and save an estimated 500 million tonnes of CO2 by 2035, as part of the third Just Energy Transition Partnership (JETP) deal that was agreed on the sidelines of the EU-ASEAN Commemorative Summit on Wednesday.

VOLUNTARY

Specific OTC nature-based carbon contracts trading at high premium to screen

Over-the-counter (OTC) deals for project-specific, nature-based credits are maintaining a healthy premium over standardised future contracts despite the recent slump in underlying prices, market sources told Carbon Pulse Wednesday.

Consultancy, analytics firms partner on new offset ratings service

A consultancy and an analytics firm have teamed up to introduce a new offset ratings service for nature-based projects in the voluntary carbon market.

Oil major’s forestry project in Congo comes under fire over land rights

(Updates Tuesday’s article with comments from TotalEnergies)

BIODIVERSITY (FREE TO READ)

COP15: UN-backed biodiversity credit alliance to launch to help scale nascent market

An alliance set up to bring clarity and scale a biodiversity crediting market, supported by the United Nations Development Programme (UNDP) and International Institute for Environment and Development (IIED), will formally launch at a side event at the UN’s biodiversity summit in Montreal on Friday, a member told Carbon Pulse.

COP15: Developing countries walk out of talks due to impasse on finance mechanism

A large group of developing countries walked out of COP15 UN biodiversity negotiations in the early hours of Wednesday morning, pointing to continued struggles related to money.

COP15: Investors call for strong global deal on biodiversity

A group of 150 financial institutions with more than $24 trillion in assets under management on Tuesday called for delegates at COP15 in Montreal to secure an ambitious Global Biodiversity Framework for the post-2020 period, with clear targets to halt and reverse nature loss.

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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

Bank steps up – British investment bank Barclays has increased its sustainable and transition finance target to $1 trillion by 2030 as part of efforts to accelerate the shift to a low-carbon economy, its head of sustainable investment told Reuters. Barclays’ new target, which will fund everything from renewable energy and green mortgages to affordable housing, marks a more than five-fold increase from the bank’s previous financing goal of $150 bln by 2025. Barclays, which had assets totalling £1.7 trillion ($2.1 trillion) as of Sep. 30, will count financing it helps companies raise in the debt and equity capital markets, so-called ‘facilitated’ finance as well as direct lending, towards the $1 trillion total. Climate activist groups have criticised such targets for being outside the scope of formal regulatory scrutiny and too broad in what they count towards the total, although Barclays will report on its progress and can be judged by its investors.

Another bank steps up – HSBC will stop funding new oil and gas fields and expect more information from energy clients over their plans to cut carbon emissions, the banking giant said, as part of a wider update of its sector policy. Activist groups that have been critical of HSBC in recent years mostly hailed the move by one of the biggest lenders to energy companies in the world as a keenly awaited update that will drive companies towards a cleaner future. HSBC is among the biggest banks to confirm it would not support oil and gas projects that received final approval after the end of 2021, a move the IEA has said is needed for the world to reach net-zero emissions by 2050. The move was welcomed by non-profit ShareAction as setting a new global minimum level of ambition for banks moving forward. HSBC said it would continue to finance energy companies at the corporate level to help them overhaul their businesses and drive development of cleaner energy sources, and would assess their strategic plans annually. (Reuters)

Insane in the methane – Record high natural gas prices and renewed concerns for energy security are making projects that capture and commercialise vented, fugitive, and flared methane increasingly economic, with the potential to lower emissions and unlock substantial new supplies of gas, a new analysis by S&P Global Commodity Insights finds. The analysis examined 6 key regions – North America, North Africa, Central Asia-China, Nigeria, Aussie-ASEAN, and Eastern Mediterranean – and found that the elevated price outlook for natural gas makes it economic to capture and commercialise more than 70% of the lost methane and flared gas from those areas, equivalent to 80 bcm of new supply. Notably, the analysis finds that it could be possible to add 40 bcm of new supply – more than the total annual demand of France – to global markets within just 2-3 years. Capturing and commercialising this gas would simultaneously reduce GHG emissions by more than 750 Mt CO2e, an amount approximately the size of Germany’s total annual emissions. Methane emission reductions are particularly critical to limit near-term warming as methane is a highly potent, short-lived climate pollutant (with over 80 times more global warming potential than CO2 over a 20-year period), and is estimated to have contributed roughly 30% of global warming to date.

EMEA

Just transition – The Lithuanian regions of Kaunas, Siauliai and Telsiai, which rely on highly GHG-intensive industrial plants, will receive €273 mln from the EU’s Just Transition Fund, the European Commission said. The money will help introduce green hydrogen and other technologies in production processes. For example, €120 mln will be invested into greening the biggest fertiliser plant in Kaunas, and around €100 mln will be dedicated to the creation of jobs in the sustainable sectors and the diversification of the economy. Furthermore, the fund will increase the uptake of renewables and energy efficiency by replacing fossil fuel boilers with renewable heat pumps, and by using renewable hydrogen and other innovative technologies in production processes. Funding will be used as well to rehabilitate and modernise industrial sites to attract SMEs.

Hydrogen hope – Net zero aviation emissions could be feasible in the UK by 2040 with a successful national hydrogen strategy, according to a study by Cranfield University, reports Simple Flying. The researchers expect the first hydrogen-powered aircraft could be flying commercially by 2026. These planes will seat between 7 and 19 people. ZeroAvia intends to operate the first commercial passenger flight between the UK and the Netherlands as soon as 2024. Currently, there is no significant UK production, although the government’s hydrogen strategy launched last year lays out plans for government and industry to work together to develop at least 10 GW of “low-carbon” hydrogen production, which should be able to produce between 800,000 and 1 mln tonnes of hydrogen per year. By 2040, the UK aviation sector may require as much as 300,000 tonnes of green hydrogen from renewable sources, the report states. As part of the UK’s Research and Innovation’s Future Flight Challenge, Cranfield researchers worked with aerospace manufacturers, airports, and other academic institutions on a project called the New Aviation Propulsion Knowledge Innovation Network, or NAPKIN, for short.

Ghana rolling in the green – Ghana has obtained $486.2 mln as first payment from the sale of carbon reductions from select forest reserves across the country, the Ghanian Times reports. While the outlet did not specify what programme the proceeds came from, the total payout aligns with the $5/tonne price earmarked for the country’s 972,500 emissions reductions as part of the World Bank Forest Carbon Partnership Facility (FCPF). A source close to the FCPF previously told Carbon Pulse the World Bank is slated to issue first payments to all 15 countries with which it has signed Emissions Reduction Purchase Agreements (ERPAs) by year-end.

ASIA PACIFIC

Show me the money – Philippines president, Ferdinand R. Marcos Jr., on Tuesday called for “more progress” in the commitment of rich nations to set up a “loss and damage” fund to support poorer countries severely impacted by climate change, Philippine News Agency reports. Marcos made this remark during the Association of Southeast Asian Nations – European Union (ASEAN-EU) working luncheon with EU leaders and businessmen in Brussels, Belgium. In his speech, the president acknowledged the agreement of nearly 200 countries at  COP27 to create a funding mechanism to compensate vulnerable nations for loss and damage from climate-related disasters. Marcos said he viewed with “some optimism” that “the concept of damage and loss has now been accepted by all parties involved.” However, he said, several questions in terms of funding remain unanswered. “This still brings us to a very difficult and fundamental question, and when you speak of damage and loss, how do we quantify that damage and loss? What are the rules that we apply? When does it begin?” he said. “We really would like to see much more progress in terms of that, the financing, with the mitigation and the adjustment of our countries who are at great risk to the effects of climate change.”

CCS for Sarawak – Malaysian state-owned oil and gas company Petroleum Sarawak Bhd (Petros) signed a Memorandum of Understanding with South Korean steel-making company Posco Group to collaborate in the development of carbon capture and storage (CCS) business in Sarawak, The Edge Markets reports. In a statement, Petros said the companies will conduct a joint study of potential carbon storage sites in Sarawak, as well as transportation of carbon dioxide from South Korea to the CCS hub in the state. They will also study CO2 injection and sequestration, solutions to reduce, mitigate and/or avoid greenhouse gas emissions arising from the CCS opportunities, and assess the technical and commercial feasibility of the CCS business, said Petros.

Knowledge seeking – Japan Petroleum Exploration, or Japex, has invested in Anri Green, a fund specialising in climate change and environmental issues, it announced Wednesday. Japex noted Anri is a venture capital firm that mainly invests in early stage venture companies, adding that it wanted to support industry-academia collaboration projects. Further, Japex said it wanted to promote the use of CCS and CCUS with companies that can utilise carbon dioxide. “in order to contribute to the realisation of a carbon-neutral society, we believe that it is essential not only to acquire the technology and experience we have cultivated in our conventional business, but also acquire advanced knowledge and collaborate with a wide range of companies,” it said. Japex added that it wanted to use its investment in Anri to gather useful information.

Not good enough – China’s agriculture and food system will face severe difficulty reaching net-zero GHG emissions by 2060 even after extensive adoption of feasible mitigation actions, South China Morning Post reports, citing a report published in October by Beijing-based consultancy Innovative Green Development Program. Under the country’s current pathway, GHG emissions from the agriculture and food system are estimated to reach 2.162 bln tonnes of CO2e by 2060, a 30% increase compared to 1.646 bln tonnes in 2019, the report found. A systematic approach that covers food production, processing, packaging, transport, retail and consumption is needed to cope with climate change, the paper suggested.

AMERICAS

Another lawsuit – The privately-owned operator of a natural gas power plant in Washington’s Grays Harbor County is challenging the constitutionality of the state’s Climate Commitment Act, which seeks to clamp down on GHG emissions by putting a price on them. Chicago-based Invenergy will be required to purchase carbon allowances, while regulated utilities that operate the other 12 natural gas plants in the state will receive them for free. The lawsuit filed Tuesday in US District Court in Tacoma comes ahead of the first auction of these allowances scheduled for February. It alleges the 2021 Climate Commitment Act runs afoul of the US Constitution by “discriminating against independent owners of natural gas power plants in violation of the Equal Protection Clause.” The lawsuit also alleges a violation of the Commerce Clause by unfair treatment of an out-of-state business. Invenergy, as an independent power producer, closely monitors the regional markets for power that fluctuate each day. And it operates the Grays Harbor plant, west of Olympia, only when the prices are high enough to turn a profit. Invenergy is concerned that regulated utilities, which will benefit from free allowances, will have a competitive advantage as they sell surplus power into regional markets, according to the lawsuit. “Invenergy stands to lose substantial amounts of revenue in the coming years as a result of the … discriminatory allocation,” said the complaint, which estimated the costs of purchasing pollution allowances at tens of millions of dollars in 2023. (Seattle Times)

CCS network – American timberland company Weyerhaeuser has leased 16,000 acres (6,475 ha) to oil and gas exploration firm Denbury for the evaluation and potential development of its first CCS site in underground geologic formations in Mississippi. The potential CCS acreage is located in Simpson and Copiah Counties adjacent to Denbury’s NEJD pipeline, and 35 mi (56 km) south of the company’s Jackson Dome field. Denbury estimates the site will have total sequestration capacity of about 275 MtCO2. Denbury intends to drill a stratigraphic test well on the site in 2023 to support the company’s geologic interpretation and progress Class VI permitting with the US EPA. Weyerhaeuser will continue to manage the timberland acreage for its own operations. Denbury also expanded its Louisiana CCS acreage, with a deal for 31,000 acres in Allen, Beauregard, and Vernon Parishes, 25 mi north of the firm’s Green Pipeline with a potential to store up to 250 MtCO2, and first injections planned as early as 2026, the report noted. Denbury has CCS storage sites in Alabama, Louisiana, and Texas. (Oil & Gas Journal)

Thermal gear – Chevron New Energies, the low-carbon fuels business unit of US oil giant Chevron, has formed a joint venture with Swedish investment and development firm Baseload Capital to develop geothermal projects in the US. The two companies will collaborate on driving geothermal opportunities – including identifying the best prospects for development, operations, and progressing the next generation of geothermal technologies from pilot to commercial scale. The first project Chevron and Baseload Capital have identified is in Weepah Hills, Nevada. (Think GeoEnergy)

VOLUNTARY

Bezos funds integrity – The Bezos Earth fund, founded by one of the richest men in the world, Amazon-founder Jeff Bezos, has announced $11 mln to support the Integrity Council for the Voluntary Carbon Market (IC-VCM) and the Voluntary Carbon Market Initiative (VCMI). “A well-designed voluntary carbon market has the potential to deliver billions of dollars into climate solutions and reduce billions of tons of carbon emissions by 2050. Yet, current standards and rules are often confusing or lack rigor,” said Andrew Steer, president and chief executive of the Bezos Earth Fund. “Trust is integral to the success of any system. These grants will help address these challenges.” Both bodies are still currently financing their guidance, aiming to build trust and credibility in the delivery and use of carbon offsets. The IC-VCM released its draft “core carbon principles” in July, but is struggling to define the detail for setting a high-quality threshold for carbon credit methodologies and certifying programmes. The VCMI published a provisional “code of practice” in June, designed to highlight companies that make genuine progress on their decarbonisation journeys. The code categorises climate claims made by businesses as either Gold, Silver, or Bronze, pegged around the concept that the use of carbon credits should go above and beyond internal and value-chain emissions mitigation. Since June, the group has finalised public consultation, and has begun piloting the code.

Forever and everimpact – Everimpact, a Paris-headquartered climate tech startup founded by former UN executives, has closed a €1.7 mln seed funding round backed by leading venture capitalists, corporate ventures, and institutions, the company said in a press release. The company’s MRV platform allows cities and organisations to measure GHG emissions more accurately and in real time due to satellites, ground sensor, and AI data. Everimpact also certifies carbon emissions and sequestration data to allow cities and industries to better identify reduction opportunities and access carbon finance to fund projects with a demonstrable climate impact.

SCIENCE & TECH

Seawater for hydrogen – Researchers in China claim to have produced hydrogen by splitting seawater without the need to desalinate or purify it first, FT reports. Since seawater accounts for more than 96% of the world’s water, this could be a significant step on the path to making green hydrogen (that produced using renewable energy) affordably. Splitting water using electrolysis is relatively straightforward, and is already done in some hydrogen-generating facilities with access to a conventional water supply. The process, which takes place in an electrolyser, electrically separates hydrogen from oxygen and allows the hydrogen to be siphoned off. But with seawater this is more complicated because salt and other impurities can effectively destroy the electrolyser. Now Heping Xie at Shenzhen University and Zongping Shao at Nanjing Tech University have come up with a workaround. They kept the electrolyser separate from the seawater with a waterproof, breathable membrane. A bit like a sieve, the membrane keeps anything other than pure water vapour from entering the electrolyser. As the water vapour is drawn in and converted to hydrogen, more is pulled in from the seawater to take its place. It is, they reported recently in the journal Nature, a self-sustaining system.

AND FINALLY…

Climate-conscious cruises – In conjunction with the Finnish government, Royal Caribbean Group signed a deal with the Meyer Turku shipyard on Wednesday that commits a plan for the production of climate-neutral ships in Finland, according to an announcement by Royal Caribbean. Both the cruise giant and Finland want to establish a roadmap for a maritime industry green transition as a way forward for innovative and sustainable shipbuilding in Finland. This is yet another step by the Royal Caribbean Group to get to net zero emissions by 2050. Known as its Destination Net Zero strategy, the company has plans to decarbonise its operations by 2050. It also aims to reduce carbon intensity by double digits by 2025 compared to 2019 and introduce a net zero cruise ship by 2035.

BONUS

Smell of success – Looking for that perfect Christmas present for the carbon markets professional who has everything? It’s come to our attention that UK-based Revolution Beauty has launched a men’s fragrance called Carbon Pulse. “Eau de Toilette Carbon Pulse by Revolution Man is a charming and seductive fragrance perfect for those who prefer a refined scent. This fragrance opens with top notes of bergamot and Sichuan pepper, that build into a subtle floral and oriental undertone, the perfect seductive and sophisticated smell,” the company writes on its website. No, we had nothing to do with this and yes, we’re as surprised as you are. For those interested in this “timeless scent at an affordable price”, it retails in the UK for £14 but is currently available at Debenham’s for half that price. Who’s says you can’t smell nice on a budget… At least one Carbon Pulse staff member has ordered a bottle to sample, so expect undertones of ebony, cedar, birch, leather, sandalwood, patchouli, and amberwood should you cross paths with him.

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