CP Daily: Friday December 16, 2022

Published 02:13 on December 17, 2022  /  Last updated at 02:13 on December 17, 2022  /  Newsletters  /  No Comments

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

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TOP STORY

Dominion Energy to buy millions of carbon permits before Virginia’s RGGI exit

Dominion Energy will purchase tens of millions of RGGI Allowances (RGAs) before Virginia leaves the cap-and-trade programme at the end of 2023, the company said this week as it petitioned the State Corporation Commission (SCC) to pass these costs along to ratepayers.

AMERICAS

California offset market participants, researchers battle over integrity of forestry protocol

Offset project developers are asking California regulator ARB to make several changes to its forest offset protocol to incorporate remote sensing and updated risk reversal ratings, as researchers continued to argue the scheme does not yield credits additional to business-as-usual practice, according to public comments.

Producers expand net short CCA positions, financials favor V23 permits in WCI and RGGI markets

Compliance entities reduced their California Carbon Allowance (CCA) holdings across the board, while financials continued to scoop up V23 CCA and RGGI Allowances (RGAs) this week at the tail end of annual rebalancing activity, according to US Commodity Futures Trading Commission (CFTC) data published Friday.

First WCI auction sale of 2023 sheds volume as caps tighten

California and Quebec will decrease the number of current and advance vintage allowances offered in the jurisdictions’ February cap-and-trade sale as emissions budgets tighten in the linked carbon market, according to an official notice published Friday.

EMEA

Norwegian Air faces €70 mln EU ETS bill for non-compliance after losing appeal

Norwegian Air Shuttle will have to pay NOK 400 million (€‎38 mln) for failing to surrender 373,000 carbon allowances for 2020 and 2021, in addition to having to procure the quantity of units it failed to turn in for those years.

Euro Markets: EUAs drop 4.6% on the week as traders wait for Fit for 55 outcome

EUAs were headed for their first weekly loss in a month on Friday as traders sold in advance of political negotiations over the ETS reform package and the expiry of the front-December futures contract on Monday, while energy prices were lower.

EU’s neighbours adopt 2030 climate targets

The ministers of energy of Western Balkan countries, Ukraine, Moldova, and Georgia announced a new collective pledge to reduce emissions, at the 20th Ministerial Council of the Energy Community on Thursday.

Polish district heating plant latest to depart EU ETS over high permit prices

A Polish district heating plant has joined the EU ETS exodus, leaving the scheme due to the high cost of carbon allowances.

ASIA PACIFIC

CN Markets: CEA price continues to drop, as analysts express modest expectations for 2023

Carbon allowances in China’s national emissions trading market dropped over the past week despite a rebound in trading volume, with little regulatory progress seen likely to continue weighing down carbon prices next year.

South Korea to sell fewer carbon allowances in 2023

South Korea will make a 20% cut in the number of CO2 allowances that will be available at auctions for ETS participants next year compared to 2022, after only being able to sell around half the KAUs it had planned to sell this year.

INTERNATIONAL

Coal demand to reach new global high in ’22 but then flatten until mid-decade, IEA says

A modest increase in coal demand this year will be enough to reach a new global record high, but its use will plateau after that until at least 2025 as Asian demand proves key to the long term trend in the use of the carbon-intensive fuel, the International Energy Agency (IEA) said on Friday.

VOLUNTARY

Data aggregator launches rating grades for VCM buyers

A data aggregator has launched a ratings page that grades buyers in the voluntary carbon market, with each company graded to reflect their commitment to offsetting in regard to emission reduction strategies and remaining residual emissions.

Indian ag carbon startup raises $6 mln in additional funding

An Indian agritech startup has raised over $6 million in its latest funding round, bringing its cumulative investor haul to $13 mln.

Cookstove projects see scores diverge after offset rating review

A carbon credit rating agency has upgraded the score of one cookstove project in Uganda and slightly downgraded another in Guatemala in it’s latest update.

BIODIVERSITY (FREE TO READ)

COP15: US and Australia agree to work together to measure nature’s economic value

The US and Australia have signed an agreement at COP15 in Montreal, agreeing to work together to better measure the economic value of nature.

Nature gets less than 1% of unprecedented EU budget -report

EU Member States are obligated to spend at least 37% of the Recovery and Resilience Facility (RRF, totalling €750 billion in 2018 prices) launched to recover from the Covid pandemic on climate-related issues, but are only devoting a small part of their budgets to nature, a report has found.

COMMENT

Offsetting aviation emissions is greenwashing if the overall climate impact of flying is not taken into account 

Airlines need to stop their continued underestimation of flight emissions and policies need to be put in place to ensure high quality carbon credits are used, writes Niklas Kaskeala of Compensate.

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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

Ship shape – The week-long MEPC meeting of UN shipping body IMO ended, as expected, with no new medium-term climate strategy or 2050 emissions target agreed. Read Carbon Pulse’s report from earlier this week detailing how this session was about teeing up those efforts at the next meeting in July. Still, NGO Opportunity Green’s Ana Laranjeira was encouraged by “an increasingly louder call from the most ambitious in the Pacific and Africa” to keep the 1.5C global warming target alive by setting ambitious goals. “Countries must urgently agree to strengthen the IMO’s greenhouse gas emission reduction targets as well as to support concrete regulatory measures, such as the $100 levy proposed by the Marshall Islands and Solomon Islands, and the Fuel Standard, as the only way to ensure a zero-emission transition in shipping that is also equitable and leaves no country behind,” she said in a statement.

AMERICAS

Green Guanajuato – The Mexican state of Guanajuato has approved a carbon tax that will take effect in June, reports Mexico Detail Zero. According to environmental consultancy MexiCO2, the carbon tax will start at MX$250/tonne ($12.63), with taxpayers receiving a 20% reduction in fees to which they are subject if emissions decrease. This will bring the number of Mexican states with carbon taxes to six, with Baja California’s fee currently inactive and Jalisco’s levy still in discussion.

Green Ecopetrol – Colombian oil and gas major Ecopetrol said it would spend between COP 5.9 trillion ($1.23bn) and COP 6.8 trillion in energy transition initiatives, such as renewables and hydrogen, as part of its investment plan for 2023, Renewables Now reports. The dedicated amount will represent around 23% of the company’s total spending, calculated at between COP 25.3 trillion and COP 29.8 trillion. Ecopetrol said it would use the energy transition funds for investments in renewables self-consumption, hydrogen, energy efficiency, carbon capture and ISA, the Colombian power transmission company and road infrastructure builder that is majority-owned by the oil producer. Last month Ecopetrol outlined a target to reach 1 GW of renewables capacity by 2030, according to a report from Bnamericas.

IESOlation – An emissions-free electricity grid in Ontario is possible, says the province’s independent electricity operator, but not until 2045 – 10 years after the federal government’s regulations for nationwide net-zero grids take effect. While Ontario’s grid is currently 91% carbon free, it will take a huge amount of time and money to eliminate natural gas plants, the last carbon-emitting source of electricity, according to a new report by the Independent Electricity System Operator (IESO). Yet the Clean Electricity Regulations (CER) being developed by the Canadian government envision a net zero grid by 2035, mostly by eliminating coal and natural gas plants. In October, the provincial government announced it will procure 1,500 MW of new natural gas generation, and promised that the plants would be paid, even if they were forced to shut down due to the federal government’s electricity regulations. Using the IESO’s projections, that those payments could tally up to more than C$1.1 bln annually, starting in 2035. But there’s another scenario, which Brooks said would be even more expensive, because the federal regulations contain a large loophole, of which Ontario’s new gas plants could take advantage. The federal government’s draft CER regulations would allow any gas plants built before 2025 to continue to operate until the end of their “prescribed life,” which the IESO pegs at 25 years. This means Ontario’s new gas plants could be allowed to operate until 2050. Because the regulations would require gas plants to pay for the full carbon tax on their emissions starting in 2035, these plants could end up being on the hook for C$1.4 bln per year, a cost that would likely be passed along to ratepayers. (Toronto Star)

Climate limbo looming – The head of the US Federal Energy Regulatory Commission (FERC) had big plans at the start of the President Joe Biden’s administration for assessing planet-warming emissions from new gas pipelines. But with FERC Chair Richard Glick’s time at the agency likely coming to an end, the commission’s path forward on climate assessments is as murky as ever, E&E News reports. Glick was known in the Trump era for frequent dissents on natural gas pipeline orders, which he often said were legally infirm by not assessing whether facilities would significantly contribute to climate change. When President Joe Biden shifted him from commissioner to chair in 2021 and FERC gained a Democratic majority, Glick vowed to adjust the agency’s approach to weighing pipelines’ GHGs. Still, nearly two years since Glick became chair, observers across the political spectrum see a difficult path forward for climate change reviews at the commission, given the continued partisan disagreements among its members and the political backlash Glick encountered over his position.

Clean hydrogen funding – The US Department of Energy, on Friday announced its intent to issue $750 mln in funding from President Biden’s Bipartisan Infrastructure Law to dramatically reduce the cost of clean-hydrogen technologies. The funding is a crucial component of the administration’s comprehensive approach to accelerating the widespread use of clean hydrogen and will play a vital role in supporting commercial-scale hydrogen deployment. Produced with net-zero carbon emissions, clean hydrogen is a key pillar in the emerging clean energy economy and will be essential for achieving the president’s goal of a 100% clean electrical grid by 2035 and net-zero carbon emissions by 2050.

Alaska eyes carbon storage – Alaska’s state government raises hundreds of millions of dollars each year through the sale of oil that when burned contributes to climate change. Now the state is looking to also make money by preventing some of these gasses from entering the atmosphere, the Alaska Beacon reports. Gov. Mike Dunleavy (R) plans to introduce a bill this upcoming legislative session aimed at turning the state’s capacity to absorb and store carbon into a source of revenue. And he said it could bring in several hundred million to a billion dollars in revenue a year. “Alaska has a real opportunity to sequester carbon in many different ways in the state – through our forests, through our depleted oil and gas basins, as well as the potential for seaweed sequestration off our coasts,” Dunleavy said during a press briefing Thursday.

Between a BlackRock and a hard place – Financial executives and Texas state senators clashed over company concerns for climate change at a hearing on Thursday, a rare in-person confrontation as Republicans ramp up attacks on the use of ESG factors in investing. Texas Republicans at the hearing questioned whether the participation of BlackRock and State Street Corp in industry efforts to cut emissions put too much pressure on portfolio companies. Bryan Hughes, chair of the Texas Senate committee that held the hearing, expressed scepticism the managers could set aside the cooperative goals of groups like the Net Zero Asset Managers initiative, which Vanguard quit last week. With some $8 trillion under management, BlackRock has been singled out by Texas for alleged over-pressuring of its important energy sector. The company has been penalised under the terms of a new state law to protect fossil fuel companies. (Reuters)

ASIA PACIFIC

Transition finance – The Asian Development Bank (ADB) has approved a sector development programme that combines a $50 million policy-based loan package with $23 mln in project investments to support the energy transition of Cambodia, Khmer Times reports. According to the bank’s news release, the Energy Transition Sector Development Program includes ADB’s first comprehensive policy reform package for the energy sector in Cambodia, which will be funded by a $40 mln loan from ADB’s concessional resources and a $10 mln loan from the ASEAN Infrastructure Fund under its ASEAN Catalytic Green Finance Facility (ACGF). For the $23 mln in infrastructure investments, the Climate Investment Fund’s Scaling Up Renewable Energy Programme for Cambodia will provide a $6 mln loan and $5 mln grant in concessional climate finance, while the Green Climate Fund will extend a $12 mln loan through the ACGF Green Recovery Programme, all of which will be administered by ADB. The programme supports the government of Cambodia’s energy transition agenda to mainstream renewable energy and energy efficiency while shifting away from fossil fuels. It adopts data-driven regulation and planning for the power system to enhance flexibility and resilience, and anchors new infrastructure investments on strategic planning while demonstrating new technologies and business models.

Wishlist – Ahead of India’s Union budget for the financial year 2023-24, the domestic industry has demanded that the import duty on electrolysers, used for splitting water to produce hydrogen, should be brought to nil, Economic Times reports. “This single step will attract huge investment in green hydrogen. This will make India [an] export hub by 2030. There is no revenue loss, as green hydrogen is not being produced in the country,” PHD Chamber of Commerce & Industry, an industry group, said in its budget wishlist. Other key recommendations include bringing a production linked incentive (PLI) scheme for wind turbine generators and equipment manufacturing in line with the solar PLI scheme, bringing taxes on bio fuels to nil, and introducing zero GST on green cement and green steel.

It’s electrifying – The Australian state of New South Wales has committed A$3 bln ($2 bln) to manufacture more than 1200 new zero emission buses (ZEBS) and convert 11 depots across Sydney to be converted for electric charging, and a new depot to be constructed. Minister for Transport David Elliot said the funding would create some 1,400 jobs, as the state looks to transition the entire fleet of 8,000 buses to electric vehicles by 2047. The move is expected to reduce emissions from the state’s public transport network by 78%, according to the government. The state has some 100 electric buses already in service.

Green Chile – In Nov. 2022, Gasvalpo, a Chilean gas distribution and retail company in which Japanese company Marubeni has a majority stake, began a pilot project which runs producing green hydrogen, injecting it into a natural gas grid, and distributing it to customers. On Dec.15, a commemorative ceremony was held in Coquimbo Province in Chile, where the site is located, according to a Marubeni press release. In this pilot project, green hydrogen produced by solar power generation is injected into the natural gas pipeline network in Coquimbo province, replacing a certain percentage of natural gas with green hydrogen, and distributed to more than 2,000 local residents and commercial customers. It is the first green hydrogen production, injection, and distribution project in South America. The entire process is conducted by Gasvalpo.

EMEA

Secret shutdowns – The shut down of German coal plants in 2021 is set to have only a minor impact on European emissions reduction because the government might not report plant decommissionings to the European Commission, newspaper Die Zeit reported. This means saved emissions from plants going offline could simply be shifted to other emitters who benefit from unused EU Allowances in the ETS through what’s known as the ‘waterbed effect’. Countries can cancel a corresponding number of unallocated EUAs when shutting down capacity to avoid this effect, which has to be communicated to the Commission before the end of the year after which the decommissioning took place. However, the government reportedly does not intend to report 2021 plant closures, the paper reported, as Berlin wants to retain the proceeds from selling permits or to avoid an EUA price rise due to the drop in supply, which would add further pressure on already high power prices. In 2019, Germany’s government promised to delete unused EUAs linked to its coal phaseout, explicitly to avoid a waterbed effect that results in additional emissions from other plants. Germany plans to finish its coal exit no later than 2038, with vast capacities slated for decommissioning by 2030. In 2022, the government ordered the temporary return of some coal plants to the market to provide more capacity to the power system and to lower gas consumption. (Clean Energy Wire)

Just transition –  The Slovenian regions of Savinjsko-Saleska and Zasavje will receive over €258 mln under the EU Just transition fund, the European Commission said on Friday. Investments will support Slovenia to reach its goal of exiting coal by 2033.

French aid – The European Commission also gave the green light to an existing scheme to support energy-intensive businesses in France. In the context of Russia’s war against Ukraine, Paris gave a budget increase of €2 bln, an extension of the period for granting aid until Dec. 31 2023, an increase in the aid ceilings, and simplified eligibility checks. In particular, the amount of individual aid will not exceed 65% of the eligible costs for an aid ceiling of €50 mln.

AND FINALLY…

Playing a whale of a role – Whales, scientists have discovered, are climate warriors, absorbing huge amounts of CO2 in their gargantuan bodies while pooping in such great quantities as to stimulate the growth of other CO2-consuming organisms in the ocean. That has sparked interest from the IMF and others in creating whale-based carbon credits or other financial mechanisms that could finance the fight against climate change and biodiversity loss. In a new paper, however, the scientists behind that carbon research deliver a message: Don’t monetise the whales. “Recent attempts to monetize whales have garnered attention by valuing an ‘average’ whale at $2 mln for carbon-capture and other services,” the scientists wrote in the peer-reviewed study published Thursday in the journal Trends in Ecology & Evolution. “As the authors of several foundational papers cited in these reports, we feel the scientific support for this valuation is lacking.” Still, the paper notes that restoring whale populations could be a “low-regret” climate strategy that’s less risky and longer lasting than proposed geoengineering solutions, such removing CO2 from the atmosphere and injecting it into the seabed. There are no current methods to determine the total CO2 removed from the atmosphere by whales’ life cycle as they traverse the ocean, according an author of the paper. However, the science is largely settled when it comes to calculating the amount of carbon absorbed and sequestered on the seabed when they die and sink to the ocean floor. The paper calculates that the world’s current population of baleen whales stores an estimated 2 mln tonnes of carbon, while their “whale falls” sequester 60,000 tonnes. The IMF in 2019 proposed assigning a value of $2 mln to each great whale to account for their role in carbon removal, calculating that the current population of the marine mammals is worth more than $1 trillion. In a follow-up paper released by Duke University in 2020, the lead author of the IMF study and his colleagues focused on eight whale species found off the coasts of Brazil and Chile. In addition to the carbon contained in their bodies, the valuation included estimates of the whales’ contribution to eco-tourism and fisheries. The largest part of their worth derived from whale excrement’s role in promoting the growth of phytoplankton, tiny creatures that are the basis of the marine food web and absorb an estimated 37 billion metric tonnes of CO2 annually. The Duke study estimated values for whales ranging from $691,634 for a sei whale to $4 mln for a Chilean blue whale, the planet’s largest animal. The average value across the eight species was around $2 mln. Valuations like those would allow the creation of incentives to avoid harming whales so their populations and carbon removal potential could expand, the authors added. “For example, a ship that strikes and kills a blue whale off the coast of Brazil should be fined the full value of the whale,” they note. (Bloomberg)

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