CP Daily: Monday December 19, 2022

Published 04:50 on December 20, 2022  /  Last updated at 04:50 on December 20, 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 strike provisional deal on remaining ETS elements of Fit for 55 package

EU legislators struck a provisional deal on the remaining EU ETS-related bills under the bloc’s overarching Fit for 55 climate policy package early Sunday, agreeing to backload efforts until later in the decade but securing a slightly higher 2030 emissions reduction target than originally proposed.

EMEA

EU lawmakers warn that ETS reform “breathing space” won’t last

The “breathing space” given to emitters in the just-agreed EU carbon market reform package is only set to last until 2027, lawmakers said on Monday, warning that the bloc’s industries will face huge difficulties with higher prices if they don’t take climate action before then.

Euro Markets: Dec-22 EUAs expire with slight gain as market absorbs Fit for 55 outcome

The December 2022 EUA futures contract ended its final day of trading marginally higher on Monday, despite losses elsewhere along the curve amid volatile trading as the market digested the outcome of ETS reform talks and market participants looked to complete their trading activity before today’s expiry.

Analysts see growing role of industrials as an EUA price driver

EU carbon market analysts expect policy developments and power sector fundamentals to remain the key drivers of EUA prices in the short-term but that the influence of industrials will grow out to 2030, according to a survey conducted by researchers and published on Monday.

EU agrees on temporary mechanism to limit excessive gas prices

EU energy ministers reached a political agreement on Monday for a market correction mechanism against excessively high gas prices, ending months of wrangling over how to tackle sky-high values after Russia curbed most of its flows into the bloc.

AMERICAS

New York committee recommends cap-and-invest programme in final climate strategy

The New York Climate Action Council overwhelmingly adopted the state’s final Scoping Plan on Monday, recommending that regulators implement an economy-wide cap-and-invest programme and consider a clean transportation standard in order to hit the state’s GHG reduction targets.

ASIA PACIFIC

Japan government fund to back biochar, seaweed carbon projects

A Japanese government fund on Monday announced investments of 15.9 billion yen ($117 mln) into research aimed at boosting carbon sequestration in agricultural, forestry, and fisheries products.

Bill introduced in India’s upper house to establish net zero policy framework

A bill has been introduced into India’s upper house that aims to provide a framework for the world’s third-largest GHG emitter to reach its target of net zero emissions by 2070.

Chongqing releases 2021 allowance allocation draft for consultation

The government of Chongqing has released a draft allowance allocation plan under its pilot emissions trading scheme, though the number of permits for 2021 is yet to be decided.

VOLUNTARY

VCM Report: Prices continues to slide lower ahead of the year-end

Thin demand and the impending roll of nearby standardised nearby futures contracts continued to weigh on the voluntary carbon market over the past week, although project specific fresher issued nature-based credits were still able to command a hefty premium.

Some of world’s largest banks gear up for scaling of voluntary carbon market with new transaction network

Several of the world’s largest banks are gearing up to enable customers to quickly trade voluntary offsets by early next year after piloting new blockchain fintech that aims to be the carbon market equivalent of the SWIFT network, which links financial institutions around the world.

Investors call for oil majors to set more ambitious full-scope climate targets

Investors with combined assets of €1.3 trillion have joined forces with an activist group to call on the world’s biggest oil firms to set more ambitious climate targets that also include Scope 3 emissions.

INTERNATIONAL

Two more African nations ready themselves for international carbon trading

Two more African nations have introduced guidelines and regulations to govern carbon trading, with a view to selling forest credits and other types of offsets to foreign buyers.

BIODIVERSITY (FREE TO READ)

COP15: World reaches global agreement on biodiversity

Delegates from 196 nations in the early hours of Monday reached agreement on a post-2020 Global Biodiversity Framework, though observers were quick to stress that strong national implementation will be crucial to make up for some weaknesses in the text.

Countries set to upgrade High Ambition Coalition to work on GBF implementation

Backed by philanthropical funders, the 116 nations in the High Ambition Coalition for Nature and People (HAC) are restructuring the group’s governance system to better equip it to help nations implement the Kunming-Montreal Agreement on biodiversity.

COP15: Global deal in the balance as biodiversity talks enter final stretch

A handful of thorny issues remain unresolved as delegates at COP15 prepare for the final two days of negotiations in Montreal, even as a steady drip of new funding announcements over the past couple of days have intended to brighten the mood of the talks.

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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

Leaky text – EU energy ministers on Monday agreed to the Council’s position on a regulation to tackle methane emissions in the fossil fuel sector and bring Europe in line with a global pledge to slash emissions by 30% by 2030. However, the European Commission, several EU countries, and green campaigners immediately criticised the ministerial text, which significantly weakened detection limits and repair thresholds in an effort to focus on bigger leaks, and also exempted offshore oil and gas wells deeper than 700 m deemed to have limited potential for gas to reach the surface. The European Parliament is still working on its position on the bill, which needs the Parliament, Council, and Commission to negotiate a final version to become law. (EurActiv)

Renewables reluctance – France, the Netherlands, Ireland, and several other EU countries are reluctant to back a European Commission proposal to boost the EU’s renewable energy objective for 2030 in response to Russia’s war in Ukraine, Euractiv reports. Member states are currently debating plans to increase the bloc’s renewable energy target to 45% by 2030, in line with Commission proposals released in May this year. The revised target was put forward as Europe seeks to exit Russian fossil fuels “well before 2030” in a bid to stop financing the Kremlin’s war effort. But states are reluctant to back the 45% target, according to a document summarising the position of EU capitals ahead of a meeting of EU energy ministers on Monday. Instead, a majority of EU countries would rather stick to the 40% goal proposed by the Commission in July 2021, according to the document prepared by Czechia, which currently holds the EU’s six-month rotating presidency. According to European diplomats in Brussels, there is currently no majority in favour of the higher target, with several key countries refusing to endorse the 45% objective. Europe currently sources just over 22% of its energy from renewables like wind, solar and biomass.

Belgian aid – The European Commission has approved a €2.1 bln scheme and a €200 mln scheme to compensate energy-intensive companies in sectors exposed to the risk of carbon leakage in the Belgian regions of Flanders and Wallon respectively, for indirect EU ETS emission costs incurred between 2021-30. The two schemes will be granted to eligible companies through a partial refund of the indirect emission costs incurred in the previous year, with the final payment to be made in 2031. Due to the extraordinary circumstances related to the current energy crisis, the deadline for the payments of 2021 will be May 31, 2023. The maximum aid amount per beneficiary will be equal to 75% of the indirect emission costs incurred. To encourage energy savings, the aid amount is calculated based on electricity consumption efficiency benchmarks. The maximum aid amount for Flemish companies could be higher to limit the remaining indirect emission costs incurred to 1.5 % of the company’s gross value added. In order to qualify for compensation, beneficiaries of the Flemish aid have to implement certain energy audit recommendations and submit a climate plan to become carbon neutral by 2050 and invest at least 50% of the aid amount in projects to reduce their carbon footprint. To be eligible, beneficiaries of the Wallon aid must either implement certain recommendations of the energy audit, cover at least 30% of their electricity consumption from renewable energy sources, or invest in at least 50% of the amount of aid in projects leading to substantial reductions in GHG emissions from their installations.

Nuclear woes – EDF extended maintenance at two nuclear reactors by four months, further straining power supplies in France and neighbouring countries this winter. The world’s largest nuclear fleet has suffered prolonged shutdowns this year that have left Europe even more reliant on natural gas at a time of record prices. While EDF has returned many units to service in recent weeks, its aging plants look set to run far below optimal capacity this winter. That could worsen an energy supply crisis that’s already cost Europe $1 trln to try to contain. The restart of EDF’s Penly-2 unit has been delayed to June 11 from Jan. 29, while its Golfech-1 generator will also be back online June 11 rather than Feb. 18, the utility said Monday in a message to the grid operator. In addition, the halt of Cattenom-3 is extended by one month to Mar. 26, and the restart of Civaux-2 is postponed by more than a month to Feb. 19. (Bloomberg)

Coal controversy – Coal mining states in eastern Germany have warned that the energy crisis makes an early phaseout of the fossil fuel too risky for the country’s energy supply. “Lignite is needed now and for the foreseeable more than it has rarely been needed before to secure Germany’s energy supply,” the state premiers from Brandenburg, Saxony, and Saxony-Anhalt told chancellor Olaf Scholz in a joint letter, as reported by newspaper Die Welt. The state premiers criticised the federal economy and climate ministry under Robert Habeck for exerting pressure directly and indirectly in many ways to compel eastern German coal companies to seek an early phase-out. They argued that Habeck’s ministry has tried to motivate eastern German companies with financial incentives to achieve an early phase-out similar to that of western coal mining state North Rhine-Westphalia, said the letter. NRW had announced it will end coal-fired power production by 2030, eight years before the ultimate end date for coal in the country decided in 2020. The ministry’s actions would undermine the entire consensus Germany had reached with respect to its coal phase out, the state premiers said. (Clean Energy Wire)

Dodgy data – The UK government is refusing to release the carbon emission figures behind its transport decarbonisation plan, which campaigners say could make proposed road schemes financially unviable. The department for transport is blocking academics from seeing the figures, which include data on how much car use would have to be reduced in order to reach net zero commitments, the Guardian reports. Campaigners say meeting these legally binding targets will be possible only with a drastic reduction in motor traffic, which could make many new road projects financially unviable. There are 32 mln cars on the UK’s roads, and they are growing both in number and size. Transport is the country’s largest emitting sector, and produced 24% of the total emissions in 2020.

Off the bench – EU officials have invited the EAVOR-LOOP project in Germany to prepare a grant agreement to finance the first commercial-scale implementation of an innovative closed-loop geothermal technology via the EU ETS-financed Innovation Fund, the European Commission said. EAVOR-LOOP failed to make the initial list of 17 projects pre-selected during the Fund’s second call for large-scale projects in July, but has been bumped from a reserve list due to two of those activities failing to complete the grant process.

Dutch aid – Small and medium-sized enterprises in the Netherlands will access a €1 bln scheme, approved by the European Commission on Monday in the context of Russia’s war against Ukraine. The purpose of the scheme is to offset a part of the monthly energy bills for electricity, gas, and heat of eligible beneficiaries. Under this measure, the aid will consist of limited amounts of funding in the form of direct grants channelled via energy suppliers.

Dutch shrinkage – Dutch civil service pension scheme ABP wants to halve the direct emissions from its total investment portfolio compared to 2019, as it targets divestments of companies that do harm to the climate. ABP, which is currently in the process of selling all its fossil fuel holdings, only wants to remain invested in companies “that also in the long term fit in a sustainable economy,” said Dominique Dijksterhuis, responsible investment executive at the scheme. The fund is currently identifying other sectors “where the business model is based on transferring negative effects on society,” a spokesperson added. ABP’s climate goal is a tick more ambitious than that of the pension fund for the Dutch metals and electronics industry PME, which also announced a new climate policy recently. PME has only promised to halve emissions of its listed investments, while ABP’s target encompasses its entire portfolio. ABP has opted for an absolute reduction target, in contrast to others that prefer a softer, relative target. According to the ABP spokesperson, an absolute target is simply a necessity. “Global emissions have to come down. With a relative measure, you correct for a company’s value or its revenues. An absolute target is better fitted to this challenge,” they told IPE. “We will concentrate our investments more. Our investable universe will certainly shrink.”

Just transition – The Irish Midlands will receive €169 mln from the EU Just Transition Fund to move away from peat production and pet electricity generation, the European Commission has announced. The money will go to economic diversification and job creation in green sectors such as sustainable tourism and the bioeconomy, in particular on around 500 local micro, small, and medium-sized businesses. The fund will also focus on research, with a new ‘centre of excellence’ on organic soils, smart mobility, and the restoration and repurposing of 12,500 ha of land.

Cementing the deal – Hanson’s plan to develop a CCS system in North Wales have taken a major step forward, with the manufacturer awarding Mitsubishi Heavy Industries Engineering a preliminary design contract for the industry-leading project, BusinessGreen reports. The company, which is the UK-arm of global cement giant Heidelberg Materials, is planning to develop a CCS system capable of capturing 800,000 tCO2/yr from the Flintshire cement factory, with a view to having the system up and running from 2027. The captured CO2 would be transported and stored under the seabed in spent gas fields off the coast of Northwest England, according to Hanson, which claims the project would constitute the UK cement industry’s first adoption of CCS technology.

ASIA PACIFIC

Hydrogen hype – Australia has only one committed hydrogen project out of a vast pipeline of proposals worth A$266 bln ($178 bln), showing the challenge in becoming a major exporter of the zero-carbon but still unproven fuel, Bloomberg reports. Investment in the country’s huge fossil sector, meanwhile, has continued apace, with oil and gas accounting for 55% of major resources projects in development, new government figures show. The world’s second-biggest exporter of coal and liquefied natural gas has in recent years talked up its potential to be a clean power and transition minerals superpower. Green hydrogen, which is manufactured using renewable energy, is central to this ambition. But the majority of hydrogen feasibility studies have ended in failure, with developers concluding that projects cannot stand up commercially, the government said in its Resources and Energy Major Projects Report released Monday, the report said. Only A$100 mln has been committed so far. “Most feasibility studies have concluded that significant government support is still required for low-carbon hydrogen projects to be commercially viable,” according to the report.

Big battery blowout — The Australia Renewable Energy Agency (ARENA) has announced it will commit A$176 mln ($118 mln) in conditional funding to eight grid scale battery projects across Australia’s east and southern states. The total value of the eight projects is estimated to be around A$2.7 bln, and will have a capacity of 2 GW/4.2 GwH – representing a tenfold increase in grid-forming electricity storage capacity current operational in the National Electricity Market. Each battery will also be equipped with grid-forming technology, allowing them to provide essential system stability services traditionally provided by synchronous generation, such as coal and gas ARENA said. Three of the batteries awarded funding are owned by French renewable energy company Neoen, located in Queensland, South Australia and Victoria. Funding will be delivered via ARENA’s Large Scale Battery Storage Round, with eight projects out of 12 shortlisted applicants. “These next generation grid scale batteries will underpin this transition, with inverter technology that can maintain grid stability without the need for coal and gas generators,” ARENA CEO Darren Miller said. “This pipeline of grid-forming projects will help move us closer to an electricity grid that can support 100% rewable energy in the NEM”. All batteries are expected to reach financial close in 2023 and be operational by 2025.

Zoning in — The Australian government has declared its first offshore wind development zone off the coast of Gippsland, Victoria in the Bass Strait, RenewEconomy reports. While there are a more than 10 GW of proposed projects in development in the zone, however the government has awarded Major Project Status to the 2 GW Star of the South project – which is the most advanced in the development pipeline. The project is being developed by Copenhagen Infrastructure Partners and Cbus. “Australia’s new offshore wind industry will start in Gippsland, Australia has huge potential in offshore wind and today the Albanese government is giving this industry a green light. This formal declaration and the Major Project Status for Star of the South will help us catch up,” Climate Change and Energy Minister Chris Bowen said. Star of the South chief Charles Rattay said the Major Project Status award will help the company navigate government approval processese spanning several departments and jurisdictions. Victoria is aiming to have 2 GW of offshore wind generation in the state by 2032, 4 GW by 2035, and 9 GW by 2040. Meanwhile the state of South Australia ran its grid on average at 103% renewables for one week straight, the ABC reports. The period lasted from Dec. 12 to Dec. 19, with no coal being used, however gas accounted for 5.9% of electricity when renewable sources were not enough to power the state at points at night. Roughly 3% of the electricity generated was exported to other states connected via the National Electricity Market.

Liquefied CO2 deal – Kawasaki Kisen Kaisha (K Line) and partners of the Northern Lights JV CCS project partners have signed bare boat charter and time charter contracts for two 7,500 m3 liquefied CO2 ships, the Japanese shipping company announced in a press release. The ships will be delivered in 2024 and will contribute to the world’s first full-scale CCS value chain. The London-based subsidiary of K Line will undertake the management of two ships transporting liquefied CO2 from industrial emitters, including the Norcem Brevik and Hafslund Oslo Celsio carbon capture facilities, to the Northern Lights CO2 receiving terminal in Oygarden, Norway. CO2 transport is a key component to connect industrial emitters in Europe to suitable and safe CO2 storage sites such as the one operated by Northern Lights in the North Sea. Northern Lights offers a ship-based solution that provides flexibility to reach emitters across Europe. Northern Lights and K Line will jointly establish operational procedures for the safe transportation of liquefied CO2.

Laos partnership — Carbon market investment company Respira International has announced a partnership with Laos-based forestry company Burapha Agro-Forestry, according to a company LinkedIn post. Respira said Burahpa is working with the Forest Stewardship Council to create carbon removal plantation projects in Western and Central Laos, targeting land previously degraded by intensive agricultural practices. The project aims to create new employment opportunities and provides a boost to the economy both locally and regionally. Burapha’s conservation areas remove, on average, more than 28,000 tCO2e from the atmosphere each year, according to Respira, with a project area covering a total of 72,000 ha with 60,000 demarcated for tree planting, and the remaining 12,000 set aside for conservation.

ESG at the core – Taiwan’s central bank said it will incorporate ESG standards into its credit policy framework, integrating sustainable development objectives with its credit line operations to be implemented by commercial banks, Digitimes Asia reports, citing President Yang Chin-long. While the Taiwanese government has already required listed companies to disclose ESG information, the central bank’s decision to formulate its ESG policy framework will further the reach to private companies and small and medium-sized enterprises to start paying attention to climate issues, according to the report.

Possible delay – Taiwan’s current legislative session has been prolonged to Jan. 13, 2023, two weeks later than the end date previously set by the government, after the ruling and opposition parties last week reached a consensus after consultations, Central News Agency reports. That indicates a possible delay in the legislative process of the island’s proposed climate bill, given that the laws are still awaiting more rounds of cross-party negotiations during the current session. The climate bill is expected to legislate the island’s 2050 net zero emissions target and include a carbon fee scheme to be imposed in phases starting with large emitters, with preferential rates granted to enterprises working to reduce their carbon output.

AMERICAS

Clean heat 2.0 – Vermont lawmaker Senator Chris Bray (D) plans to reintroduce legislation for a clean heat standard as ‘The Affordable Heating Act’ that would gradually transition home heating and cooling systems away from fossil fuels, a statewide news agency reported. The previous bill that passed both legislative bodies fell one vote shy of overturning Republican Governor Phil Scott’s veto, but after the 2022 elections both legislative bodies now have Democrat and Progressive supermajorities to override the governor’s veto. Senator Bray expects the new bill to include much of the same features as the clean fuel standard. Under the legislation, homeowners would earn credits for installing a heat pump, efficient appliances, and weather-proofing as long as the project measurably reduces GHG emissions. Obligated parties – or fossil fuel dealers – would be required to buy credits or generate an increasing number of credits per year. Governor Scott had expressed concern that the bill would give the state’s Public Utility Commission too much power and potentially raise costs for Vermonters, the report said. Senator Bray plans to include a provision in the new bill that would send the commission’s recommendations back to the legislature for approval. The report noted that the failure of the clean heat standard was partly due to disagreement within the environmental community about the inclusion of “sustainably sourced biofuels” and “renewable natural gas” as a clean heat measure eligible for credits. Senator Bray plans to address emissions resulting from the entire life cycle of a fuel in the new bill, the report added. Furthermore, the recent Weatherization Repayment Assistant Program initiative has helped Vermonters pay for weatherisation through financing on their utility bills. The report cited environmental groups Rights & Democracy and the Conservation Law Foundation being prepared to support the bill if biofuels and affordability were addressed. (VTDigger)

Flood funding – A budget proposal to fund flood and sea level rise projects is an alternative to the RGGI programme that Gov. Glenn Youngkin (R) wants Virginia to leave, his top natural resources official says. Youngkin’s budget amendments include a $200 mln deposit into the new Resilient Virginia Revolving Loan Fund for flooding prevention projects. It will be a first step toward addressing sea level rise and other climate change challenges, replacing funding that now comes from the RGGI cap-and-trade system to reduce carbon emissions, acting Secretary of Natural Resources Travis Voyles told the Joint Commission on Administrative Rules. Since Virginia joined RGGI, the state has received some $523 mln in proceeds from RGGI’s auctions of credits that allow electric generating plants to exceed pre-set limits on how much CO2 they emit. Some $235 mln has gone into the Community Flood Preparedness Fund, which finances flood control efforts, including measures to address sea level rise. (Richmond Times-Dispatch)

Clean driving – Oregon’s Environmental Quality Commission adopted rules Monday in a 3-1 vote to require all new passenger cars, trucks, and SUVs sold in the state to be zero emissions by 2035. The commission is the policy and rulemaking board for the Oregon Department of Environmental Quality. Known as Advanced Clean Cars II, the set of rules builds on regulations in place since 2005 that have laid the groundwork for the increase in automakers providing zero emission vehicles – full battery electric, plug-in hybrid electric, or fuel cell – to the market. Oregon has been a national leader in zero-emission vehicle sales over the past several years. Reducing emissions from gas cars is imperative to meeting Oregon’s climate and air quality goals.

Climate chief – A top EPA attorney is leaving the agency to become Massachusetts’ first climate chief, Greenwire reports. Melissa Hoffer, principal deputy general counsel in EPA’s Office of General Counsel, will be returning to the Bay State to join incoming Democratic Gov.-elect Maura Healey’s administration, Healey and Lt. Gov.-elect Kim Driscoll announced Monday. Hoffer will oversee climate policy in every state agency. Further, Massachusetts will be the first state to have such a position at the cabinet level, according to the announcement. Healey has a broad climate agenda for the state, including having 100% of its electricity carbon-free by 2030. On the campaign trail, she said she would raise targets for wind and solar energy, deploy 1 mln electric heat pumps and put 1 mln EVs on the road by 2030.

Tree planting pact – The Honourable Jonathan Wilkinson, Canada’s Minister of Natural Resources, and the Honourable Shane Thompson, the Northwest Territories’ Minister of Environment and Natural Resources, on Friday announced that the Government of Canada and the Government of Northwest Territories signed an Agreement in Principle under the 2 Billion Trees program. With this agreement, Canada and the Northwest Territories are leveraging their shared commitment to delivering social and environmental benefits for communities through tree-planting. Canada and the Northwest Territories are collaborating to address climate change, protect nature and important habitats, fight biodiversity loss, improve air and water quality, and preserve our natural heritage for future generations, the statement said.

AVIATION

New faces – ICAO’s Technical Advisory Body that oversees the CORSIA aviation offsetting scheme has updated its list of members.  There were two changes: Finland’s Karoliina Anttonen – a legal expert at Finland’s Ministry of Environment – has replaced Sweden’s Ulrika Raab; and Saudi Arabia replaced its Abdulrahman M. Albassam with Abdelrahman M. Al-Gwaiz.

AND FINALLY…

Follow up – A prominent activist group has filed shareholder resolutions calling on four of the biggest western energy companies to cut emissions more aggressively this decade in an effort to revive investor pressure on Big Oil over climate goals. In motions submitted to BP, Shell, ExxonMobil and Chevron, Dutch shareholder activist Follow This called on the companies to set clear targets to reduce their Scope 3 emissions by 2030, in order to be “consistent” with the goals of the Paris Agreement. The group said the motions, seen by the Financial Times and set to be unveiled on Monday, had been co-sponsored by investors with more than $1.3 trillion in assets under management.  The last Follow This resolution, which also called for more aggressive climate targets, won support from just over 20% of shareholders at Shell in May, down from 30% the year before, and only 15% of shareholders at BP, down from 21% a year earlier.

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