CP Daily: Monday January 9, 2023

Published 00:35 on January 10, 2023  /  Last updated at 00:35 on January 10, 2023  /  Newsletters  /  No Comments

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

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TOP STORY

Chubb review finds ACCU market well-designed but calls for sweeping changes

The review into the Australia’s carbon offset market has called for the scheme’s governance structure to be broken up, and has revoked one of the methodologies it assessed, despite the panel describing the scheme as “fundamentally well-designed”.

ASIA PACIFIC

Groups welcome ACCU governance overhaul but criticise failure to address method issues

Australian market players and observers have welcomed the Chubb review’s recommendations to overhaul the governance structure of the scheme, but some have argued the panel failed to address fundamental issues with the methodologies that will continue to undermine its credibility.

China releases policy draft for new energy system, highlighting market-based mechanisms

China’s energy regulator has issued a draft strategy with policy objectives for the country’s power sector over the coming decades, signalling the government’s increased emphasis on market-based means to build towards a renewable-based new power system.

South Korea to fund CO2 cuts for ETS participants

South Korea’s environment ministry on Monday launched a call for proposals from ETS participants to apply for a total 138.8 billion won ($111.6 million) in government support for projects that will cut CO2 at their facilities.

EMEA

ANALYSIS: Analysts play down rapid industrial demand rebound and sustained fuel switching amid crashing price of gas

Despite a month-long sell-off on European gas prices, it is not likely that there will be a quick return to EUA buying for industrials that have suspended operations amid extreme energy costs, nor a sustained ramping up of coal-to-gas fuel switching, analysts have told Carbon Pulse.

PREVIEW: Sweden’s EU Presidency aims to conclude Fit for 55 climate package

The EU Presidency under Sweden will aim to bring the remaining Fit for 55 climate bill to a close over its six month term through to July, the nation’s deputy ambassador to Brussels said on Monday.

Nearly all FTSE 350 firms raised carbon credit investment over last two years -report

Some 96% of companies in the UK-based FTSE 350 share index increased expenditure on the voluntary carbon market over the past 24 months of which more than 50% did so dramatically, while around half said they plan to substantially raise spending over the next 24 months, according to research published on Monday.

Euro Markets: EUAs post 5% rally as market shakes off holiday lull and looming auction increase

EUAs rose by 5% on Monday, moving in a range of nearly €5 as the market appeared to easily absorb the first auction of the year, despite energy fundamentals that continue to suggest utility demand from should be weak and the prospect of additional auction volumes when the EU signs off on the REPowerEU initiative.

AMERICAS

RGGI Market: RGA prices dive 7% on warm weather, programme uncertainty

RGA prices took a sizable step back to start the new year, amid continued uncertainty on the scheme’s programme review and as unseasonably warmer weather permeated the Northeastern and Mid-Atlantic US states.

New York state lawmaker reintroduces bill to help assign CO2 price to electricity market

A New York senator on Friday brought back legislation that would build support for establishing a carbon price in the state’s wholesale power market, following the finalisation of the state’s Scoping Plan climate strategy that said such a measure may be necessary.

VOLUNTARY

VCM Report: Market corrects back on thin volume after bullish final week of 2022

Selling pressure during the second half of the week weakened most standardised carbon credit prices with a return to thin traded volume as many of the gains made during a bullish final week to last year were undone when end of year compliance obligations had caused a jump in demand.

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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

Flood fallout – Pakistan has appealed to the global community for $8 bln in three years to help it rebuild after devastating floods that left a third of the nation inundated in the summer. The South Asian nation needs a total of $16.3 bln to rebuild houses and farms along with rehabilitate people impacted by the floods, Prime Minister Shehbaz Sharif said at a conference in Geneva. The nation plans to fund the remaining half from its own resources. The nation is also open to debt swaps and other financial instruments with friendly countries that will help free up resources to spend on flood-related activities, said finance minister Ishaq Dar. (Bloomberg)

You hear that, Mr. Andersen? – The Financial Times reports that, according to its sources, Russia is trying to block the reappointment of the head of the UN Environmental Programme “following a highly critical report about the impact of the war on Ukraine”. Russia has agitated for several months against the reappointment of Inger Andersen, an economist with a long career at the World Bank, as the executive director of UNEP, according to two UN sources. The move is seen by diplomats as part of a broader effort by the country to exert influence on the world stage and undermine the objectives of western nations that have condemned Russia’s invasion of Ukraine. (Carbon Brief)

EMEA

Windfallout – Blackout fears mount as EDF has warned it may have to shut down two UK nuclear power plants as a result of the implementation of the new windfall tax on low carbon electricity producers, Energy Live News reports. As part of a financial Autumn statement, the government confirmed that a 45% windfall tax would be imposed on renewable electricity generators from Jan. 2023. The tax on excess profits is set to be in place until March 2028. The new tax is aimed at helping subsidise the government support for rising household energy bills. EDF has said the tax will make it more difficult to keep the ageing Heysham 1 and Hartlepool power plants online for as long as had been intended.

Capacity carve-out – Britain announced new proposals for its electricity capacity market on Monday, launching a public consultation on plans to introduce multi-year contracts to incentivise cleaner technologies to take part, and also set new timelines for contracted oil and gas producers to begin reducing emissions for newly-built plants from 2034 – the current eligibility threshold is 550g/CO2 per kWh with no further limit. The potential changes to the market are designed to boost investment in cleaner alternatives to the gas-fired power stations that currently dominate the market, including energy storage systems, flexible grid services, and power plants using CCS, or hydrogen technologies.

Non merci – The decision to include households in the EU carbon market is causing a stir among French lawmakers on the far-right and far-left of the European Parliament who are united in their opposition to the proposal, Euractiv reports. At the end of December, EU legislators agreed to extend the bloc’s ETS to the building and transport sector, including private households. This decision leaves a bitter aftertaste for French lawmakers on the far-right and far-left who continue to oppose the text and see the decision as a betrayal of their mandate. Despite the move to set up a Social Climate Fund worth €87 bln, French MEPs warned against a social revolt similar to the one instigated by the gilets jaunes movement in France.

Industry first – The German economy ministry is working on a proposal to subsidise offshore electricity for industry customers through an auction scheme in order to shield companies against rising costs, business daily Handelsblatt reported. A consortium of consulting firms including Consentec, Enervis, Ecologic and the Fraunhofer Institute for Systems and Innovation Research (ISI) in a joint paper proposed to use contracts for difference and auctions. However, the introduction of such a system could take time, with legal implementation possible “in 2024 at the earliest,” said the consultancy paper. Accordingly, the first tenders could take place at some point in 2024 to 2025. However, the offshore wind turbines, still to be built, would not go into operation until 2029 to 2030. (Clean Energy Wire)

Gapping out – Spain will seek EU permission to extend its temporary cap on reference prices for natural gas and coal used by power plants until at least the end of 2024, Energy Minister Teresa Ribera said on Monday. The so-called Iberian mechanism, in place in Spain and Portugal after the two countries reached a deal with the European Commission in the spring of 2022, is a joint scheme through which fossil fuel plants’ power costs are subsidised in a bid to bring down soaring electricity prices. (Reuters)

Referendum, SVP – Switzerland’s right-wing Swiss People’s Party (SVP) will within a few days call a referendum aimed at blocking a draft law to cut greenhouse gas emissions, party officials said. The SVP, a member of the ruling coalition in Bern, is campaigning against the law to make Switzerland carbon neutral by 2050 but has so far failed to attract backing from other parties. The proposed legislation would accelerate CO2 emissions cuts and the rollout of renewables, notably solar energy, backed by 2 bln Swiss francs ($2.2 bln) of funding. The SVP argues that imposing further reductions would be counterproductive during the current energy crisis, triggered across Europe after Moscow cut off most gas deliveries in response to Western sanctions imposed over Russia’s invasion of Ukraine. In Switzerland, proposed referendums require the support of 50,000 signatures to be activated. (Reuters)

ASIA PACIFIC

A few more months – India could see the very first trade in its planned domestic carbon market in Q3 this year, while the credit registry is expected to be finalised over the next 3-4 months, the Economic Times reported Monday, citing power secretary Alok Kumar. The market is set to be a voluntary pilot scheme over 2023-25, before transitioning to a more standard emissions trading scheme from 2026.

Land parcels — The Western Australian state government has earmarked land for seven green energy and manufacturing projects collectively valued at A$70 billion at two heavy industrial estates near Port Hedland and Onslow, the Nine Newspapers report. BP, POSCO, Fortescue Metals Group, Alinta Energy and Tees Valley Lithium were allocated land at the 4000 hectar Boodarie strategic industrial area south of Port Hedland. BP secured the land to support the A$53 billion Australian Renewable Energy Hub, which it plans to progressively develop 26 GW of wind and solar energy, used to produce green hydrogen and then transform it into green ammonia for export. POSCO secured land to use hydrogen to make high-quality pellets of iron that when used in electric powered steel furnaces removes coal from the process. Alinta Energy said it was considering producing green hydrogen at Boodarie, where it has a gas-fired power station.

Thawing of relations – China Energy Investment Corp, one of the country’s major three state-owned power groups, has placed an order to import Australian coal, in one of the first deals since Beijing eased an unofficial ban imposed on coal imports from Australia in 2020, Reuters reports. The move came as trade relations between Beijing and Canberra are improving, and as China, previously a major consumer of coal from Australia, is trying to meet growing demand for coal due to higher power consumption following the easing of coronavirus-related restrictions. However, the lifting of the coal ban may not immediately alter trade routes that have evolved over the past two years, given the higher prices of Australian thermal coal, according to the report.

AMERICAS

Trading places – Virginia-based Nodal Exchange, with its collaborator IncubEx, continued to grow trading in the environmental futures and options markets, according to a company press release. Nodal achieved a record 280,603 lots of environmental futures and options volume traded in 2022, representing 13% growth over 2021. Nodal also set a calendar month environmental trading record in December with 32,642 lots, up 21% from 26,915 lots in December 2021. Nodal US environmental futures and options open interest at year end 2022 was 223,275 lots, up 31% from 170,770 at the end of 2021. Total notional value of environmental products traded on Nodal hit a new record of $2.1 bln in 2022. In 2022, Nodal introduced new contracts in the voluntary and compliance carbon markets and first-ever products in RECs and renewable fuel credits. The new listings pushed the number of environmental products offered on Nodal to more than 100, extending the largest suite of environmental products offered on any exchange, the company said.

NewPrice – NuScale Power Corporation announced Monday that the Project Management Committee (PMC) of its Carbon Free Power Project (CFPP) had passed a resolution to move the project forward. With the acceptance of the project’s cost estimate (PCE), the PMC approved a new Budget and Plan of Finance (BPF) and an update to the Development Cost Reimbursement Agreement (DCRA) of $89/MWh – a key milestone in the development of the CFPP, the company stated in the press release. The updated DCRA reflects the changing financial landscape for the development of energy projects nationwide. The CFPP will be the first NuScale Power SMR nuclear power plant to begin operation in the US near Idaho Falls, Idaho, deploying six, 77MW modules to generate 462 MW of carbon-free electricity. The PCE has been influenced by external factors such as inflationary pressures and increases in the price of steel, electrical equipment, and other construction commodities not seen for more than 40 years, the company noted.

Green waste-to-hydrogen – Raven SR, a renewable fuels company, Chevron New Energies, a division of Chevron USA, and Hyzon Motors Inc. announced on Monday that they are collaborating to commercialise operations of a green waste-to-hydrogen production facility in Richmond, California, intended to supply hydrogen fuel to transportation markets in the northern part of the state. The facility will be owned by a newly formed company, Raven SR S1. Raven SR will be the operator of the facility, which is targeted to come online in the first quarter of 2024. Chevron holds a 50% equity stake in Raven SR 1. Raven SR holds a 30% stake and Hyzon owns the remaining 20%. To produce the hydrogen, the project is expected to divert up to 99 wet tonnes of green and food waste per day from Republic Services’ West Contra Costa Sanitary Landfill into its non-combustion Steam/CO2 Reforming process, producing up to 2,400 t/y of renewable hydrogen. Diversion of this organic waste will help fulfill SB 1383 mandates, and will potentially avoid up to 7,200 t/y of CO2 emissions from the landfill.

Colombian clean power dips – Clean and renewable energy sources were behind 85.08% of Colombia’s electricity production in December, national grid operator XM Compania de Expertos en Mercados said. In November, non-polluting sources pushed the nation’s clean power share to 89.26%. Power plants in the national SIN grid system produced a total of 6,618.85 GWh in December, which translated to an average of 213.51 GWh/day, or 0.38% less compared to daily averages in November. Renewables, including large hydro power plants with reservoirs, generated 181.65 GWh/day on average, down by 5.04% month-on-month. Hydro inflows remained above the historical average for 11 consecutive months, enabling the country to keep its hydro reservoirs 79% full on average in December. While this was lower by 8.1 percentage points compared to November, the decrease in reservoir levels is consistent with the start of the summer season, which will last until March 2023, XM said. (Renewables Now)

SCIENCE & TECH

Zoning out – The hole in the Earth’s ozone layer is set to be completely healed over most of the world by 2040 following decisive action by governments to phase out ozone-depleting substances under the 1989 Montreal Protocol, according to the latest UN-backed scientific assessment panel to the Protocol, published every four years. It added that the action taken on the ozone layer had also bolstered climate action and would otherwise have raised global temperatures by as much as 1C by 2050. It said that the unified global response to dealing with CFCs means that the Montreal agreement should be considered “the most successful environmental treaty in history and offers encouragement that countries of the world can come together and decide an outcome and act on it”, according to lead author David Fahey, a scientist at National Oceanic and Atmospheric Administration. (Guardian)

Log off – When carbon-storing trees are cut down for timber and new ones grow in their place, those young trees also absorb carbon, which might seem to suggest the new trees make up for the loss of the old ones. However, a paper published Monday in Proceedings of the National Academy of Sciences finds that logged tropical forests are net producers of carbon for years as they recover from tree removal. Logged forests emit carbon from soil matter and decaying wood, and those emissions outweigh the amount of carbon that the regrowing forests absorb for at least a decade, according to the six-year study. Previous research has focused on how much carbon new trees remove, but did not necessarily account for the carbon emissions from the soil and decaying wood, according to lead author Terhi Riutta of the University of Exeter. The new findings hint that the absorption potential of logged tropical forests may, in fact, be smaller than previously estimated. (Bloomberg)

AND FINALLY…

You want fries with that? – Fast food restaurants can battle climate change—even without reducing their paper and plastic use, according to a new study. Adding “climate impact” labels next to food items decreased “high climate impact” beef orders by 23%, according to the study from Johns Hopkins University’s Bloomberg School of Public Health. And including “low climate impact” labels next to entrees like chicken sandwiches, salads, and fish dishes increased such climate-healthy choices by about 10%. Researchers provided thousands of online participants with a sample menu, asking each to order a single item for dinner. Some were provided with a menu with “high climate impact” labels, some with “low climate impact” labels, and some with no labels. “These results suggest that menu labelling – particularly labels warning that an item has high climate impact – can be an effective strategy for encouraging more sustainable food choices in a fast food setting,” the study’s lead author, Julia Wolfson, associate professor in the Department of International Health at the Bloomberg School, said in a press release. (Fortune)

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